THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 

SCH0((5pftL/^ 

bender-Moss  Co. 


\ 


TRUSTS 

FOR 

BUSINESS    PURPOSES 


BY 

WILLIAM  C.  DUNN 

OF  THE  CHICAGO  BAR 


CHICAGO 

CALLAGHAN  AND  COMPANY 

1922 


Copyright   19^2 

By 

WILLIAM  C.  DUNN 

r      ' 
L 

191^ 


PREFACE. 

In  all  probability  no  part  of  our  law  is  so  well  settled  as  that 
in  reference  to  trusts  and  trustees ;  a  rule  on  this  subject  laid 
down  in  one  section  of  the  country  is  usually  adopted  and  ap- 
plied in  another.  The  reason  for  this  is  readily  found  in  that 
the  principles  underlying  the  trust  are  the  same  throughout  the 
country  irrespective  of  state  lines.  This  of  course  is  not  true 
of  the  corporation,  for  each  state  has  its  own  acts  and  no  state 
is  bound  by  the  interpretation  of  the  corporate  law  of  a  sister 
state. 

The  trust  as  a  business  organization  may  easily  be  investi- 
gated under : 

First :     The  source  of  its  rights  and  its  status  in  the  law. 
Second:     The  relation  of  trustee  and  beneficiary,  and  the 
rights  and  duties  of  each,  and 

Third:  The  effect  of  legislation  on  the  trust.  In  this  con- 
nection it  is  of  interest  to  note  that  the  trust  may  engage  and 
do  all  things  which  an  individual  may  do ;  and  so  far  the  only 
restriction  sought  to  be  placed  on  the  individual  is  in  banking 
and  insurance. 

In  the  preparation  of  this  work,  reports  were  examined  and 
not  reference  works,  and  where  possible  the  language  of  the 
decision  is  used,  with  the  thought  in  mind  that  the  busy  lawyer 
is  more  interested  in  the  law  expressed  by  the  court  than  the 
deductions  of  a  law  writer.  In  one  sense  this  may  be  consid- 
ered a  digest  of  the  law  as  to  the  trust;  and  in  another,  a  com- 

(iii) 


670793 


iv  Pref'ace;. 

pilation  of  selected,  leading  cases  which  bear  directly  on  the 
trust  as  used  for  business  purposes. 

This  volume  is  ofifered  to  lawyers  and  the  pviblic  with  the 
hope  that  a  closer  acquaintance  and  a  better  understanding  of 
the  trust  as  a  business  organization  may  be  acquired. 

December  15,  1922.  William  C.  Dunn. 


FOREWORD. 

For  many  years  past,  corporation  law  has  been  changing  con- 
stantly ;  business  has  been  affected  to  such  an  extent  by  these 
changes  that  it  now  asks  if  there  is  not  some  stable  mode  of 
organization  to  which  it  might  attach.  At  the  forty-fourth  an- 
nual convention  of  the  American  Bar  Association  at  Cincinnati, 
Ohio,  in  August,  1921,  Elihu  Root,  distinguished  lawyer  and 
former  Secretary  of  State,  said:  "Modification  of  the  prin- 
ciples of  law  is  going  on  at  greater  speed  and  in  larger  scope 
than  ever  before,  changes  in  the  administration  of  law  have 
forced  themselves  even  to  the  attention  of  the  public.  The  ap- 
plication of  law  is  so  widely  different  from  that  of  fifty  years 
ago  that  some  guiding  line  must  be  found."  Business  men 
carrying  on  trade  and  commerce  have  felt  the  full  force  of 
this  statement  far  more  than  any  other  body  of  men  in  this 
country,  for  they  have  had  to  meet  it,  and  without  choice  are 
compelled  to  comply  with  the  ever-changing  corporate  law.  , 

In  our  forty-eight  states,  some  of  the  legislatures  meet  every 
year  and  some  of  them  every  other  year,  and  upon  an  examina- 
tion of  their  statutes  scarcely  one  will  be  found  in  the  last 
decade  where  the  legislature  has  not  passed  some  act  in  refer- 
ence to  corporations;  in  some  cases  amendments  have  been 
made  and  in  others  the  corporate  law  has  been  revised  and 
reenacted  in  its  entirety.  This  procedure  is  perfectly  natural, 
for  with  the  expansion  of  business,  the  corporation  law,  of 
necessity,  must  change  to  meet  the  new  problems  presented  in 
the  business  world.     The  corporation  being  a  creature  of  the 

(v) 


vi  Foreword. 

law,  depends  for  its  existence  on  a  franchise  and  can  do  only 
what  the  state  grants  in  the  way  of  a  privilege;  this  is  the  chief 
reason  why  new  rules  must  constantly  be  made  and  added  to  a 
much  over-burdened  business  conducted  under  corporate  or- 
ganization. While  this  is  true  of  the  corporation,  it  has  no 
application  to  the  trust,  for  the  principles  underlying  the  latter 
form  of  business  organization  are  entirely  different  from  those 
of  the  corporation  in  that  the  trust  is  not  a  creature  of  the 
law,  it  is  not  beholding  to  the  state  for  a  franchise  nor  does  it 
exist  by  reason  of  any  grant  or  privilege;  its  position  in  the 
law  is  that  of  a  right — the  same  as  the  right  of  an  individual — 
to  alienate  property  and  to  contract,  and  this  right  is  protected 
in  our  law,  and  by  our  Constitution. 

The  foreign  corporation  law  brings  added  amioyance  and  ex- 
pense to  concerns  doing  an  interstate  business.  In  the  early 
days  of  our  country,  when  business  was  local,  state  lines  were 
scarcely  ever  crossed,  and  business  was  not  worried  about  for- 
eign corporation  acts;  but  today  it  has  expanded  and  become 
so  centralized  that  state  lines  mean  nothing  more  than  de- 
markations  where  additional  fees  may  be  collected  as  a  foreign 
corporation  tax. 

With  the  progress  of  our  country,  the  expansion  of  business, 
the  amendments  and  changes  in  our  corporate  law  to  meet  this 
development,  we  have  a  situation  in  which  the  state,  through  its 
corporate  law  with  its  rules  and  regulations,  is  a  dominant  fig- 
ure in  the  world  of  business.  This  condition  was  brought  about 
not  by  any  particular  thought  or  design,  it  is  evolutionary  and 
it  is  here  as  a  problem.  Years  ago  there  was  great  controversy 
over  the  church  and  state  which  eventually  led  to  the  separation 
of  the  two ;  today  business  asks  if  there  is  not  a  way  whereby 
it  may  be  divorced  from  an  increasing  political  domination. 
Government  in  its  inception  lias  for  its  purpose  the  protection 


Foreword.  vii 

of  property;  but  where  business  is  subservient  to  the  state, 
socialism  or  paternaHsm  prevails.  The  state,  as  a  matter  of 
course,  should  protect  the  citizens  from  fraud  and  imposition, 
and  the  police  powers  properly  applied  are  sufficient  to  meet 
any  emergency  or  contingency  and  are  adequate  for  suitable 
regulation,  but  controlling  business  by  use  of  the  corporate 
law  is  quite  another  question. 

The  express  companies  long  ago  realized  the  impracticability 
of  the  corporation  law;  they  found  how  unsuitable  it  was  for 
them  to  comply  with  all  the  foreign  corporation  laws  of  the 
different  states  in  which  they  might  transact  business,  and  they 
solved  their  difficulty  by  adopting  a  form  of  organization  some- 
thing akin  to  a  trust.  In  general,  the  organization  under  which 
they  operated  and  conducted  one  of  the  largest  businesses  in  the 
country,  may  be  described  as  an  association  or  joint-stock  com- 
pany with  trust  powers;  several  decisions  are  reported  in  this 
work  which  show  in  detail  the  exact  character  of  their  organiza- 
tion. Like  the  express  companies  fifty  years  ago,  business  in 
general  is  casting  about  today  for  an  organization  that  will  be 
permanent  in  form,  one  that  knows  no  state  boundaries,  one 
where  personal  liability  is  limited,  and  one  that  will  permit  it 
to  do  business  in  any  part  of  the  country  without  being  ham- 
pered by  state  lines  and  a  foreign  corporation  tax.  All  of  this 
may  be  done  under  a  pure  trust,  and  this  form  of  organization 
properly  applied  to  present  needs  and  for  legitimate  ends,  will, 
in  a  great  measure,  relieve  business  from  certain  burdens,  most 
of  which  are  political. 

The  principles  of  law  underlying  the  trust  are  thoroughly 
settled  and  well  established.  The  application  of  these  prin- 
ciples to  modern  business  is  becoming  better  understood  each 
day;  business  men  and  lawyers  in  groups  here  and  there 
throughout  the  country  have  applied  the  trust  as  a  business  or- 


viii  Foreword. 

ganization  to  all  kinds  of  enterprise  and  commerce.  The  list 
following  will  give  some  idea  of  the  use  to  which  the  trust  has 
been  put  in  the  different  states  and  the  diverse  character  of 
industry  conducted  under  its  organization;  citations  wherein 
the  various  concerns  were  in  litigation  are  also  given : 

COTTON  MILLS  AND  PRINT  WORKS. 

Garner  &  Company  of  New  York. 

Thorn  v.  DeBreteuil,  179  N.  Y.  64,  71  N.  E.  470. 
Reported  under  Estoppel. 

STREET  CAR  LINES  IN  CHICAGO  AND  INDIANA. 

Chicago  City  and  Connecting  Railways  Collateral  Trust. 
Venner  v.  Chicago  Ry.  Co.,  258  111.  523,  loi  N.  E.  949. 
Reported  under  Public  Policy. 

PATENTS. 
Mayo  v.  Moritz,  151  Mass.  481,  24  N.  E.  1083. 

HOTEL. 

Estate  of  John  Plankinton,  Milwaukee. 

Upham  V.  Plankinton,  152  Wis.  275,  140  N.  W.  5. 

FERRY  BOAT. 

Whitman  v.  Porter,  107  Mass.  522. 

MANUFACTURING. 

Pepperell  Manufactory  Company. 

Malley  v.  Bowditch,  259  Fed.  809,  7  A.  L.  R.  608. 
Reported  under  Taxes. 


Foreword.  ix 

BUILDING  AND  LOAN  ASSOCIATION. 

The  Great  American  Home  Saving  Institution. 
State  V.  Lee,  233  S.  W.  20. 
Reported  under  Distinguished  from  Other  Organizations. 

FOUNDRY. 

Froelich  Estate. 

In  re  Froelich  Est.,  50  Misc.  Rep.  103,  100  N.  Y.  Sup.  436. 

TOWN-SITE  COMPANY. 

Denver  Townsite  Company. 

Spotswood  V.  Morris,  12  Idaho  360,  85  Pac.  1094,  6  L.  R. 
A.  (N.  S.)  665. 

LUMBER  AND  SALT. 

Loud  V.  Winchester,  52  Mich.  174,  17  N.  W.  784. 

COLLECTION  OF  RENTS. 

The  Wachusett  Realty  Trust. 

Crocker  v.  Malley,  249  U.  S.  223,  63  L.  Ed.  573,  2  A.  L. 

R.  180 1,  39  Sup.  Ct.  270. 
Reported  under  Trust  as  an  Entity. 

WAGON  FACTORY. 

Pittsburgh  Wagon  Works. 

In  re  Pittsburgh  Wagon  Works  Estate,  204  Pa.  432,  54 

Atl.  316. 
Reported  under  Trust  Property. 


FoRJiWORD. 

STEAM  RAILWAYS. 

Caney  River  Railway  Co. 

Wright  V.  Caney  River  Ry.  Co.,  151  N.  C.  529,  66  S.  E. 

588,  19  Am.  Case  384. 
Reported  under  Trust  Property. 

HARDWARE  BUSINESS. 

Simmons  Hardvi^are  Co.,  St.  Louis,  Mo. 

BUILDING  AND  REAL  ESTATE. 

Norwood  Land  and  Building  Assn. 

Hart  V.  Seymoure,  147  111.  598,  35  N.  E.  246. 

HOSPITAL. 

IMartin-Copeland  Company. 

Rhode  Island  Hospital  Trust  Co.  v.  Copeland,  39  R.  I.  193, 
98  Atl.  273. 

Reported  under  Trusts  Distinguished  from  Other  Organi- 
zations. 

GENERAL  MERCHANDISE. 

Nathan  Connally. 

Connally  v.  Lyons,  82  Tex.  664,  18  S.  W.  799,  27  Am.  St. 

Rep.  935. 
Reported  under  Liability  of  Trustees. 

ROYALTY  ON  MACHINES. 

McKay  Sewing  Machine  Association. 
Gleason  v.  McKay,  133  Mass.  419. 
Reported  under  Taxes. 


Foreword.  xi 


REAL  ESTATE. 


Daggett  Building  Association. 

Howe  V.  Morse,  174  Mass.  491,  55  N.  E.  213. 

Reported  under  Deed  of  Trust. 
Homan's  Real  Estate  Trust. 

Priestley  v.  Burrill,  230  Mass.  452,  120  N.  E.  100. 

Reported  under  Trust  Property. 

OIL. 

Davis-Coggins  Oil  Company. 

Davis  V.  Hudgins  (Texas)  225  S.  W.  73. 

Reported  under  Receivership. 
Texline-Burk  Oil  Co. 

Bingham  v.  Graham  (Texas)  220  S.  W.  105. 

Reported  under  Beneficiaries. 


TABLE  OP  CONTENTS. 

FOREWORD. 

CHAPTER  I. 
DEED  OF  TRUST  OR  TRUST  INSTRUMENT. 

1 — Definition. 

2 — Formality  in  Creating. 

3 — Mtist  be  Written. 

A — For  What  Purpose  May  Be  Created. 

5 — Consideration. 

6 — Elements. 

7 — Construing. 

8 — Trustees  Take  Title  at  Time  of  Execution  and  Delivery. 

9 — Who  May  Create. 
10 — Trust  May  he  Created  by  Will  or  Deed. 
11 — Trust  Distinguished  From  a  Gift. 
12 — Amendraents. 
13 — Notice — Recording. 
14 — Seal — Definition  and  History. 
15 — Termination  of  Trust. 

(a)  By  Instrument. 

(b)  By  Trustor. 

(c)  By  Trustee. 

(d)  By  Beneficiary. 

(e)  From  Other  Causes. 
16 — Rule  Against  Perpetuities. 
17 — Purpose  of  Rule. 

18 — Applies  to  Trust  Estates  and  Personal  Property. 
19 — Equitable  Interest  is  in  Shareholders. 
20— Beneficiaries  Not  Entitled  to  Partition. 

CHAPTER  II. 

VALIDITY. 

Rights  Distinguished  Feom  Law. 

21 — In  General. 

22 — Sale  of  Beneficial  Interest  in  Reference  to  Security  Act. 
23 — Illinois  Security  Act  in  Reference  to  Common  Law  Com- 
panies. 
24 — Common  Law  as  Affected  by  Statute, 


(xiii) 


xiv  Table  of  Contents. 


The  Trust  as  aw  Entity. 
25 — In  General. 

26 — A  Trust  to  Distribute  Income. 
27 — Functions  of  Trustee  and  Beneficiary  Differentiated. 

Public  Policy. 
28 — In  General. 

29 — A  Trust  for  Operating  Street  Car  Lines. 
30 — Powers  Given  to  Trustees. 
31 — Trustees  Subject  to  Committee. 
32 — Stockholders  May  Pool  Interests. 
33 — Directors  Elected  by  Trustees. 
34 — Consolidation  by  Trust  Agreement. 
35 — Transferring  Shares  to  Qualify  Director. 
36 — Trust  Does  Not  Imply  Incorporation. 
37 — Merger  Not  Contrary  to  Law. 
38 — Summary. 

CHAPTER  III. 

TRUSTOR— CREATOR— SETTLOR. 

39— WTio  May  Be. 

40 — May  Create  for  His  Benefit  and  Others. 

41 — May  Act  as  Trustee. 

42 — Revocation  of  Instrument. 

CHAPTER  IV. 

TRUST  PROPEIRTY. 

43 — In  General. 

44 — Purchasing  by  Trustee. 

45 — Purchasing  Beneficial  Interests  by  Trustee. 

46 — Mingling  With  Other  Property. 

47 — Following. 

48 — Liability — Expenses — Fees. 

49 — Trust  Estates  in  Reference  to  Torts. 

50 — Provision  for  Trustee's  Duties. 

51 — Trustee  Liable  in  his  Official  Capacity. 

52 — Liability  May  be  Limited  by  Stipulation. 

53 — Not  Liable  for  Trustee's  Private  Debts, 

54 — Distribution. 

55 — Shareholders'  Interest — Personalty. 

56 — Shareholders'  Interest — Real  Estate. 

CHAPTER  V. 
CERTIFICATES— BENEFICIAL.  INTERESTS— SHARES. 

57 — History. 

58 — English  Rule. 


Tabl^  of  Contents.  xv 


59 — 'American  Rule. 

60 — Partnership  Shares — Legal. 

61 — Bubble  Act  not  Applicable  to  America. 

62 — Beneficial    Interest    Passes    to    Legal    Representative    at 

Death. 
63 — Profits  and  Losses  Follow  Certificate. 
64 — Transferability. 
65 — Sale  of  in  Reference  to  Security  Act. 

CHAPTER  VI. 

INTERSTATE  COMMERCE. 

66 — In  General. 

67 — Trust  Not  Subject  to  Foreign  Corporation  Acts. 
68 — Unincorporated  Not  Evibraced  in  Word  Corporation. 
Trust  Protected  in  Trade  Name. 
69 — In  General. 

70 — Business  Name  Protected  by  Injunction. 
71—^oint  Stock  Company  and  Partnership  Distinguished  From 

Corporation. 
72 — Foreign  Corporation  Act  Not  Applicable  to  Organization 

Created  by  Contract. 
73 — Trust  May  Use  Trade  Name  for  Legitimate  Purpose. 
74 — Right  of  Trust  to  do  Interstate  Business. 

CHAPTER  VII. 
BENEFICIARIES— SHAREHOLDERS. 

15— Who  May  Be. 

76 — Rights  in  General. 

77 — Wrongs  to  Beneficiaries  May  be  Presented  to  the  Court  by 
Petition. 

1^— Beneficiaries  Entitled  to  Information  From  Trustees. 

79 — Where  Fraud,  Bad  Faith,  or  Mismanagement  is  Shown 
Shareholders  May  Ask  for  Receiver. 

80 — Procedure  in  Appointment  of  Receiver. 

81 — Officers  May  be  Elected  by  Trustees. 

S2— 'Shareholders  May  Sue  for  Themselves  and  Others. 

83 — Appointment  of  Receiver  Discretionary  With  Court. 

84 — Beneficiaries  May  Have  Trustees  Removed  for  Cause. 

85 — In  Emergency,  Receiver  May  be  Appointed  Ex  Parte  With- 
out Notice. 

86 — Right  to  Accounting. 

87 — Right  to  Protect  Trust  Property  or  Funds. 

88 — Rights  Against  Trustees  and  Others. 

89 — Right  to  Reimbursement. 

90 — Right  to  Transfer  and  Assign  Interest. 

91 — May  Act  as  Trustees. 

92 — Liability. 


xvi  Table  op  Contents. 

93 — Not  Liable  as  Partners. 
94 — Ratification. 

CHAPTER  VIII. 

TRUSTEES  IN  GENERAL. 

95 — Appointment  of. 

96 — Holders  of  Legal  Title. 

97 — Act  as  a  Unit. 

98 — Act  by  Majority. 

99 — Cotrustees. 
100 — Substituted  Trustees. 
101 — Attorneys  as  Trustees. 


CHAPTER  IX. 


POWERS  OF  TRUSTEES. 

102 — Express. 
103 — Implied. 
104 — Discretionary. 
105 — Personal. 
106 — Incidental. 
107 — Restricted. 


CHAPTER  X. 


DUTIES  OF  TRUSTEES. 


108 — To  Manage  Property  for  Shareholders. 

109 — To  Carry  Out  the  Trust. 

110 — Substituted    Trustee    May    Follow    Business    Methods    of 

Predecessor. 
Ill — To  Account. 
112 — To  Keep  Books. 
113 — To  Use  Prudence  and  Care. 
114 — To  Exercise  Good  Faith  and  Sound  Discretion. 

CHAPTER  XI. 

LIABILITY  OF  TRUSTEES. 

115 — Personal. 

116 — Partnership  Liability  Not  Applicable  to  Beneficiaries. 
117 — Mere  knowledge  of  Creditor  Not  Sufficient  to  Exempt  Trus- 
tee from  Personal  Liability. 
118 — For  Mismanagement. 
119 — For  Acts  of  Others. 
120 — For  Negligence. 
121 — For  Misappropriation. 


Table  of  Contents.  xvii 


122— 'Extent  of. 
123 — lAmitation  of. 
124 — NonliaMUty. 

CHAPTER  XII. 

COMPENSATION  OF  TRUSTEES. 

125 — Fixed  l)y  Instrument. 

126 — Reasonahle. 

127 — Excessive. 

128 — Commission. 

129 — Alloiced  by  Court. 

130 — Forfeiture  of. 

131 — Reimbursement. 

132 — Expenses  of  Trust  in  General. 

133 — Attorneys'  fees. 

CHAPTER  XIII. 

REMOVAL  OF  TRUSTEES. 

134 — Jurisdiction. 

135 — In  General. 

136 — For  Breach  of  Trust. 

137 — For  Neglect  or  Misuse  of  Trust  Property. 

138 — For  Holding  Conflicting  Interest. 

139 — Death  of  Trustee — Survivorship. 

CHAPTER  XIV. 
TRUST  DISTINGUISHED  FROM  OTHER  ORGANIZATIONS. 

Not  a  Partnership. 

140 — In  General. 

141 — What  Constitutes  Partnership. 

142 — Difference  Bettveen  Trust  and  Partnership. 

143 — Shareholders  Not  Associated. 

144 — Acts  of  Parties  Decisive  in  Determining  Intention. 

145 — Trustee  May  Ask  Instructions  of  Court. 

146 — Declaration    of    Trust    Determining    Factor    in    What    is 

Created. 
147 — Profit  Sharing  in  Relation  to  Partnership. 
148 — Where  Trustees  Are  Masters,  a  Trust  is  Created. 

Not  Stjbject  to  Cobpoeation  Acts. 

149 — In  general. 

150 — Rights  of  Certificate  Holders. 

151 — Cash  Surrender  Value  of  Trust  Certificate. 

152 — Duties  of  Directors. 

153 — Trustee's  Certificate  Assignable. 


xviii  Table  of  Contents. 


154 — Trust  Agreement  Does  Not  Create  a  Partnership. 

155 — Liability  Limited  to  Trust  Funds. 

156 — Corporation  Act  Not  Applicable  to  Trust. 

157 — Trust  Protected  in  Trade  Name. 

158 — Business    Under    Trust    Agreement    Enjoys    no    Special 

Privilege. 
.159 — Building  and  Loan  Business  May  be  Conducted  as  a  Trust 

in  Missouri. 

English  Rule. 

160 — In  General. 

161 — Meaning  of  Word  Business. 

162 — What  Constitutes  Doing  Business. 

163 — What  is  Doing  Business  for  Gain. 

IQi— Trust  for  Investment — Distinguished  From  Doing  Busi- 
ness. 

165 — Company,  Association,  and  Partnership  Defined. 

166 — Trust  Deed  Does  Not  Constitute  an  Association. 

167 — Distinction  Between  Trustee  and  Director. 

168 — Trustees  Are  Associated. 

169 — Certificate  Holders  Not  Associated. 

170 — A  Trust  is  Not  Embraced  in  the  Words  Association,  Com- 
pany or  Partnership. 

CHAPTER  XV. 

EQUITY. 

171 — Jurisdiction. 

172 — Restricted  Jurisdiction. 

173 — Cannot  Create  a  Trust. 

174 — Trustees  May  Seek  Instructions  From  the  Court. 

175 — May  Remove  Trustees. 

176 — May  Appoint  Trustees. 

CHAPTER  XVI. 

LACHES. 

177 — In  General. 
178 — Actions  Barred  by. 
179 — Actions  Not  Barred  by. 
ISO— Estoppel. 

CHAPTER  XVII. 

TAXES. 

181 — Trust  Not  Subject  to  Tax  Under  Corporation  Act. 
182 — Not  Subject  to  Capital  Stock  Tax. 
183 — Not  Subject  to  Franchise  Tax. 


Tabli:  of  Contents.  xix 

184 — Stamp  Tax. 

185 — Franchise  Tax  DistinguisTied  From  Stamp  Tax. 

186 — Income  Tax. 

CHAPTER  XVIII. 
THIRD  PARTIES— CREDITORS. 

187 — Taking  or  Dealing  With  Trust  Py-operty  With  Notice. 
188 — Creditors  of  Trust. 


CHAPTER  XIX. 


BANKRUPTCY. 


189 — In  General. 

190 — Receivership. 

191 — Not  Necessary  for  All  Beneficiaries   to  Join  in  Suit  for 

Receiver. 
192 — Evidence  Must  ie  Positive  as  to  Wrongdoing  of  Trustee 

Before  Court  Will  Appoint  Receiver. 

CHAPTER  XX. 

BUSINESS  AND  LEGISLATION. 

193 — In  General. 

194 — Banking  Limited  to  Corporations. 

195 — Regulation  is  not  Prohibition. 

196 — Insurance  Limited  to  Corporations. 

197 — Police  Potoers  in  General. 

198 — Insurance  in  Relation  to  Police  Poiver. 

199 — Modern  Legislation. 

200 — Regulation  of  Business  Under  Police  Power. 

201 — Corporations  7vith  Exclusive  Privileges — Monopolies. 

202 — Issuing  Bank  Notes  not  a  Private  Right. 

203 — Exclusive  Grant  to  a  Class  is  Prohibition,  not  Regulation. 

204 — Banking  Act  of  South  Dakota. 

205 — Franchise  Distinguished  from  a  Right. 

206 — Privilege  to  Issue  Currency  is  a  Franchise. 

207 — Citizens  Have  Rights  Which  the  Sovereign  May  Not  Usurp 

by  Franchise. 
208 — Police  Power  Defined. 

209 — Business  May  be  Regulated,  but  not  Prohibited. 
210 — Individual  Rights  Guaranteed. 
211 — Pursuit  of  Lawful  Business  is  a  Right. 

CHAPTER  XXI. 
ESSENTIALS  IN  PREPARING  TRUST  INSTRUMENT. 
212 — Trust  Property. 


XX  Table;  of  Conte^nts. 


213 — Duration  of  Trust. 

2U—Seal. 

215 — Purpose  of  Trust. 

216 — Beneficial  Interests. 

217 — Committee  of  Beneficiaries. 

218 — Partnership  Liability. 

219 — lAability  Limited. 

APPENDIX. 

(References  are  to  Pages.) 

EXHIBITS. 

The  Wachusett  Realty  Trust.     (Income  from  a  Mill.) 420 

Davis  Coggins  Oil  Co.     (Oil  Business.) 426 

Pepperell  Manufacturing  Co.     (A  trust  for  manufacturing  pur- 
poses. )     437 

Martin-Copeland  Co.     (A  hospital  maintained  and  operated  un- 
der Trust  Agreement.) 454 

Pietsch,  Mathilde.     (Trust  for  benefit  of  Trustor.) 468 

Haulman,  Harry  I.     (Trust  agreement  and  will.) 471 

Plankinton,  John.     (Declaration  of  Trust  in  form  of  will.)....   475 

Pennyroyal   Development  Company.      (Oil.) 484 

Great  American  Home  Savings  Institution.     (Building  and  loan 

association. )    503 

Denver  Townsite  Company.      (A  land  company.) 520 

Oakala  Pood  Association.      (Canning  and  ice  plant.) 525 

Homan  Real  Estate  Trust  Deed.     (Real  Estate.) 553 

Boston  Real  Estate  Trust  Agreement.     (Real  Estate.) 559 

"Warren  Chambers  Declaration  of  Trust.      (Real  Estate.) 564 

American  Manufacturing  Company.     (Manufacturing  and  Sale 

of  tractors. )    570 

A  general  form  of  a  trust  agreement 585 

Domestic  Products  Company.     (A  general  sales  organization.)  .  .   611 
Chicago    City   and   Connecting   Railway    Collateral    Trust.      (A 

trust  agreement  for  operating  street  car  lines.) 625 

The  Co-Operators  of  America.     (Retail  and  Wholesale  Grocery.)   685 

The  Guaranty  and  Accident  Lloyds.      (Insurance.) 729 

Table  of  Cases 744 

Index. 


TRUSTS   FOR  BUSINESS 
PURPOSES 


CHAPTER  I. 
DEED  OF  TRUST. 


I — Definition. 


A  trust  is  an  equitable  obligation,  either  expressed  or  im- 
plied, resting  upon  a  person  by  reason  of  a  confidence  reposed 
in  him,  to  apply  or  deal  with  property  for  the  benefit  of 
some  other  person  or  for  the  benefit  of  himself  and  another 
or  others,  according  to  such  confidence;  it  is  holding  of 
property  subject  to  a  duty  of  employing  it  or  applying  its 
proceeds  according  to  directions  given  by  the  person  from 
whom  it  was  derived.^  Again  a  trust  has  been  defined  as  a 
confidence  reposed  in  one  or  more  persons,  by  and  for  the 
benefit  of  others,  with  respect  to  property  held  by  the  former 
for  the  others'  benefit;  the  person  in  whom  this  confidence 
is  reposed  who  holds  title  to  the  property  in  question  is  the 
trustee,  and  the  person  for  whose  benefit  the  property  is  so 
held  by  the  trustee  is  the  beneficiary — cestui  que  trust,  or  as 
referred  to  in  the  Roman  law — the  fidei-commissarius.*^ 

1  Templeton  V.  Bockler,  73  Ore.  Union,  200  Ala.  23,  75  So.  335; 
494,  144  Pac.  405.  Keplinger  v.  Keplinger,  185  Ind. 

2  Teal  V.  Pleasant  Grove  Local      81,  113  N.  E.  292. 

(I) 


2  Trusts  for  Business  Purposes. 

In  its  technical  sense,  a  trust  is  the  right,  enforceable  solely 
in  equity,  to  the  beneficial  enjoyment  of  property,  the  legal 
title  of  which  is  vested  in  another  and  implies  separate  co- 
existence of  the  legal  and  the  equitable  titles  vested  in  differ- 
ent persons  at  the  same  time;  in  its  more  comprehensive  sense 
the  term  embraces  every  bailment,  every  transaction  by  agent 
or  factor,  every  deposit,  and  every  matter  in  which  the  slight- 
est trust  or  confidence  exists.'  The  word  trust,  however,  is 
frequently  employed  to  indicate  duties,  relations,  and  re- 
sponsibilities which  are  not  strictly  and  technically  trusts.* 

2 — Formality  in  Creating. 

No  particular  formality  is  necessary  in  the  creation  of  a 
trust ;  any  agreement  or  contract  in  writing  made  by  the  per- 
son having  the  power  of  disposition  of  property,  agreeing  or 
directing  that  a  certain  fund  or  parcel  of  property  be  held  or 
dealt  with  for  the  benefit  of  others,  raises  a  trust  in  favor  of 
such  others  against  the  person  making  the  agreement.^  Nor 
is  it  necessary  in  order  to  declare  a  trust,  that  the  words 
'trust'  and  'trustee'  or  equivalent  words  be  used  where  the 
intention  to  create  a  trust  clearly  appears  from  the  language 
actually  employed.^     This  was  also  the  rule  at  common  law  f 

3  Bowes  V.  Cannon,  50  Col.  262,  Mo.  642,  43  S.  W.  617;   Taber  v. 

116  Pac.  336.  Bailey,  22  Cal.  App.  617,  135  Pac. 

4Holsapple     v.     Schrontz,     65  975;    Moulden  v  Train,   199   Mo. 

Ind.  App.  390,  117  N.  E.  547.  App.    509,    204    S.    W.    65;    Pem- 

5  Richards  v.  Wilson,  62  Ind.  broke  Academy  v.  Epsom  School 
App.  4,  112  N.  E.  7S0;  St.  Cath-  Dist.,  75  N.  H.  408,  75  Atl.  100; 
erine's  Cemetery  v.  Fidelity  Teal  v.  Pleasant  Grove  Local 
Trust  Co.,  152  Ky.  797,  154  S.  W.  Union,  Supra;  Laws  v.  Christ- 
29;  Wood  v.  Owen,  133  Ga.  751,  mas,  178  N.  C.  359,  100  S.  E.  587. 
66  S.  E.  951;  Austin  v.  Wilcox-  7  Smith  v.  Smith  (Ky.),  121  S. 
son,  149  Cal.  24,  84  Pac.  417.  W.  1002. 

6  In   re   Soulard's   Estate,    141 


Deed  of  Trust.  3 

the  instrument,  however,   should  be  clear  and  concise  as  to 
parties  and  object. 

W'hile  the  foregoing  is  the  general  rule  as  to  the  formality 
in  creating  a  trust,  some  states  have  statutory  provisions  for 
the  establishment  of  express  trusts  and  these  statutes  should 
be  conformed  to  strictly.^ 

3 — Must  be  Written. 

It  is  a  well  settled  rule  of  law  that  a  trust  of  personal  prop- 
erty may  be  created  by  parol  and  its  existence  proved  by  oral 
testimony,  but  the  evidence  must  be  clear  and  explicit  as  to 
the  subject-matter,  parties,  and  purpose,  and  leave  no  room 
for  a  reasonable  doubt  that  a  trust  is  intended.^  Express 
trusts  concerning  real  estate  must  be  in  writing  to  satisfy  the 
statute  of  frauds.^**  Business  trusts  which  may  own  personal 
property,  or  real  estate,  or  carry  on  commerce  and  trade, 
should,  without  doubt,  be  in  writing;  trusts  created  by  the 
direct  and  positive  act  of  the  parties  by  some  writing  or  deed 
or  will,  directly  and  expressly  pointing  out  the  property, 
persons,  and  purposes  of  the  trust,  are  called  direct  or  'ex- 
press' trusts.^^ 


SKoehler    v.    Koehler    (Ind.),  10  Moulden    v.    Train,    Supra; 

121  N.  E.  450.  Nolan  v.   Guggerty,   187   la.   980, 

9  Carroll    v.    Woods,    132    Mo.  174    N.   W.    706;    In   re   Mahin's 

App.   492,  111   S.  W.  885;    Wieh-  Estate,    161    la.    459,   143    N.    W. 

teiichter  v.   Miller,  276   Mo.   322,  420. 

208    S.    W.    39;     St.    Catherine's  H  St.   Catherine's  Cemetery  v. 

Cemetery  v.   Fidelity   Trust   Co.,  Fidelity  Trust  Co.,  Supra;   U.  S. 

Supra;    Citizens'    Natl.    Bank    v.  Fidelity  Co.  v.  Smith,  147  S.  W. 

McKenna,  168  Mo.  App.  254,  153  54. 
S.  W.  521. 


4  Trusts  for  Business  Purposes. 

4 — For  What  Purposes  May  he  Created. 

The  owner  of  real  estate  can  specifically  appropriate  rents 
and  profits  to  a  named  purpose,  or  create  a  trust  in  them  sepa- 
rate and  apart  from  the  title  to  the  real  estate  ;^^  or  the  prop- 
erty itself  may  be  the  subject  of  a  trust  just  the  same  as 
personal  property ;  there  seems  to  be  no  limitation  on  property, 
personal  or  real,  or  other  property  rights  that  may  be  the  subject 
of  a  trust. ^'  Any  right,  interest  or  thing  which  may  be  the 
subject  of  property,  or  Avhich  the  law  recognizes  as  valuable, 
may  be  granted  or  transferred  in  trust.^*  The  law  recognizes 
the  right  of  the  owner  of  property  to  deed  it  in  trust,  it  also 
protects  the  trust  property  in  all  business,  commerce  and  trade 
which  is  not  contrary  to  law.  The  general  rule  is  that  a  trust 
may  be  created  for  all  purposes  for  which  an  individual  may 
use  property  or  property  rights. 

5 — Consideration. 

For  ordinary  purposes  it  is  unnecessary  to  the  validity  of  a 
declaration  of  trust  for  it  to  be  based  on  a  consideration  passing 
to  the  trustee;  for  upon  delivery  of  the  declaration  of  trust  a 
perfect  and  complete  trust  is  established  which  will  be  enforced, 
although  voluntary. ^^  This  rule  applies  only  where  the  trust 
is  created  by  voluntary  disposition  and  is  a  completed  transac- 
tion.^^    The  common-law  rule  was  that  a  consideration  was 

12  Gisborn  v.  Charter  Oak  Life  Bailey,  22  Cal.  App.  617,  135  Pac. 

Ins.  Co.,  12  Sup.  277.  975;   Nichols  v.  Emery,  109  Cal. 

l3FIaulman    v.    Haiilman,    164  323,  41  Pac.  1089. 
la.  471,  145  N.  W.  930.  16  Reynolds  v.   Thompson,   161 

14  Burke  V.  Burke,  259  111.  262,  Ky.  772,  171  S.  W.  379;  Fisher 
102  N.  E.  293.  V.     Hempton     Transp.     Co.,     136 

15  Schumacher    v.    Dolan,    154  Mich.  218,  98  N.  W.  1012. 
la.  207,  134  N.  W.  624;  Taber  v. 


Deed  of  Trust.  5 

necessary  in  a  deed  of  bargain  and  sale  in  order  to  prevent  a 
resulting  trust;  however,  this  has  been  abolished  by  statute  in 
most  of  the  states. ^^^ 

Where  a  trust  deed  recites  a  valuable  consideration,  contains 
apt  words  of  conveyance,  is  under  seal,  and  is  delivered  to  the 
trustee  who  receives  the  deed  and  agrees  to  carry  out  all  the 
trusts  therein  stipulated,  the  legal  title  to  the  property — ^as  be- 
tween the  parties — passes  to  the  trustee  even  without  delivery.^''' 
When  a  valuable  consideration  exists  between  an  alleged  trustee 
and  beneficiary,  a  court  of  equity  may  deem  a  contract  to  de- 
clare a  trust  as  equivalent  to  an  actual  declaration.^^ 

6 — Elements. 

While  no  particular  words  are  necessary  to  create  a  valid 
trust,  the  writing  of  the  trustor  must,  however,  express  a  decla- 
ration or  grant  by  him  of  an  estate  or  interest  containing  all 
the  essential  elements  of  a  trust.^^  These  essentials  of  a  valid 
trust  are  (i)  sui  juris  trustor,  (2)  a  designated  beneficiary, 
(3)  a  designated  trustee,  (4)  a  fund  or  property  so  distin- 
guished as  to  pass  title  to  the  trustee,^''  (5)  the  necessary  writ- 
ing stating  the  object  of  the  trust.  In  addition  to  the  neces- 
sary elements,  the  trustor  must  do  everything  that  can  be  done 

I6J  Campbell  v.  Noble,  145  Ala.  Austin  v.  Cahill,  99  Tex.  172,  88 

233,  41  So.  745.  S.  W.  542. 

17  Kelly  V.  Snow,  185  Mass.  20  Brown  v.  Spohr,  87  App. 
288,  70  N.  E.  89.  Div.  522,  84  N.  Y.  Sup.  995;  Kahn 

18  Austin  V.  Young,  90  N.  J.  v.  Tierney,  133  App.  Div.  897, 
Eq.  47,  106  Atl.  395.  120    N.    Y.    Sup.    663;    Conley   v. 

l9Nortbrip  v.   Burge,   225  Mo.  Daughters    of    Republic     (Tex.), 

C41,    164    S.    W.    584;    Bay    Bis-  156  S.  W.  197;  Central  Trust  Co. 

cayne  Co.  v.  Baile,  73  Fla.  1120,  v.    Gaffney,    157    App.    Div.    501, 

75   So.   860;    Floyd  v.   Smith,  59  142  N.  Y.  Sup.  902. 
Fla.    485,    51    So.    537;    City    of 


6  Trusts  for  Business  Purposks. 

— the  character  of  the  property  comprising  the  trust  being  con- 
sidered— to  transfer  the  property  to  the  trustee  in  such  mode 
as  will  effectually  pass  title.^^  Acceptance  of  a  trust  is  essen- 
tial to  the  vesting  of  title  in  the  trustee.^^  The  signing  by  the 
trustee  of  a  deed  creating  a  trust  and  his  acknowledgment  of 
the  same,  constitutes  a  complete  acceptance  of  the  trust.^^ 

The  trustee's  signature  may  be  made  by  initials  and  may  be 
placed  on  any  part  of  the  declaration  of  trust,  providing  he 
signs  for  the  purpose  of  giving  authority  to  the  instrument.^* 
The  better  rule,  however,  is  for  the  trustee  to  sign  his  full  name 
in  the  proper  place  on  the  instrument.  The  trust  is  said  to  be 
executed  when  no  act  is  necessary  to  be  done  to  give  it  effect. ^^ 

7 — Construing  Trust  Instrument. 

Though  no  particular  form  of  words  or  the  use  of  the  words 
'trust'  or  'trustee'  is  necessary  to  create  a  trust,  the  intention 
to  create  it  must  be  clear  and  the  writing  must  be  reasonably 
certain  with  reference  to  the  subject-matter,  the  beneficiaries, 
the  nature  and  quantity  of  their  interests,  and  the  manner  in 
which  the  trust  is  to  be  perf  ormed.^^  It  has  been  said  also  that 
the  creation  of  a  trust  does  not  depend  upon  the  use  of  any 
particular  language  or  form  of  expression,  but  upon  the  mean- 
ing of  the  language  employed  when  fairly  construed  in  the  light 
of  the  circumstances,  relation,  and  situation  of  the  parties;  if 

21  State  V.   Ellison,   216   S.   W.      Eq.  47,  10  Atl.  Rep.  178. 

967;     Loring    v.     Hildreth,     170  25  Massey    v.    Huntington,    118 

Mass.   328,  49   N.  E.  652.  111.  80,  7  N.  E.  269;  State  v.  Elli- 

22  Brandon  v.  Carter,  119  Mo.  son,  216  S.  W.  967;  Skeen  v. 
572,  24  S.  W.  1035.  Marriott,    22    Utah    73,    61    Pac. 

23  Dayton   v.    Stewart,   99    Md.  296. 

643,  59  Atl.  281.  26  Otjen  v.  Frohbach,  148  Wis. 

24McVay   v.   McVay,   43    N.   J.      301,  134  N.  W.  832. 


Deed  of  Trust.  7 

the  intent  to  create  a  trust  is  clear  and  the  essential  elements 
may  be  fairly  deduced  from  the  language  employed,  the  trust 
will  not  fail  for  the  lack  of  more  adequate  expression.^''' 

The  modern  and  better  rule  is  that  the  intention  to  create 
should  be  set  forth  clearly ;  there  should  be  no  room  for  doubt 
in  the  language  used  in  the  instrument  of  trust  which  is  to  be 
used  for  business  purposes.^^  Where  the  meaning  of  a  con- 
tract is  doubtful,  the  fact  that  the  parties  thereto  adopt  a  par- 
ticular construction  and  for  many  years  acquiesce  in  and  act 
upon  it,  should  lead  a  court  without  hesitation  to  adopt  that 
construction  as  the  proper  one.^^  Where  the  language  of  a 
trust  is  ambiguous,  it  must,  if  possible,  be  construed  in  favor 
of  the  beneficiaries  and  against  the  trustee.^*'  The  court  in  con- 
struing a  trust  must  look  to  the  instrument  creating  it  and  con- 
strue it  subject  to  the  rules  governing  the  interpretation  of 
contracts. ^^  The  court,  in  determining  whether  a  trust  or  a 
partnership  is  created,  will  consider  what  the  parties  did  and 
will  not  consider  what  they  intended  to  do,  unless  there  is  a 
doubt  as  to  what  they  did.^^  If  the  words  of  a  trust  deed  are 
plain  and  unambiguous,  there  is  no  necessity  for  judicial  inter- 
pretation.^^ The  law  of  the  place  where  the  trustor  resided  at 
the  time  of  the  execution  governs  the  construction  of  a  trust. ^* 
Whether  a  trust  is  created  or  not  is  a  question  of  fact  in  each 

27Holsapple    v.     Schrontz,     65  Cal.  App.  664,  121  Pac.  407. 

Iiid.    App.    390,    117    N.    E.    547;  31  Ringrose  v.  Gleadall,  supra. 

Cahlan   v.    Bank   of   Lassen    Co.,  32  Williams    v.    Inhabitants    of 

11  Cal.  App.   533,  105   Pac.   765;  Milton,    215    Mass.    1,    102   N.    E. 

Carr  v.   Carr,   15   Cal.   App.   480,  355. 

115  Pac.  261.  33  Crown  v.  Cohn,  88  Ore.  642, 

28  Skeen  v.  Marriott,  supra.  172  Pac.  804. 

29  Nickerson  v.  Atchison  T.  34  Curtis  v.  Curtis,  185  App. 
&  S.  F.,  17  Fed.  408.  Div.  391,  173  N.  Y.  Sup.  103. 

30  Ringrose     v.     Gleadall,     17 


8  Trusts  i^or  Business  Purposes. 

case  and  the  court  in  determining  the  fact  will  give  effect  to 
the  situation  and  relation  of  the  parties,  the  nature  and  situation 
of  the  property,  and  the  purpose  or  object  which  the  settlor  had 
in  view  in  making  the  disposition.^^ 

One  of  the  leading  cases  on  the  construction  of  a  trust  in- 
strument is  Haulman  v.  Haulman;^^  in  this  case  Harry  Haul- 
man  gave  $2500.  in  trust  and  the  same  day  executed  a  will 
(copies  of  both  instruments  will  be  found  in  the  Appendix). 
Upon  his  death  his  wife  in  a  petition  sought  to  declare  the  trust 
invalid  and  asked  that  the  property  transferred  in  trust  be  de- 
clared a  part  of  the  estate.  The  court  held  that  the  trust  was 
valid ;  that  the  property  had  passed  irrevocably  to  the  trustees ; 
that  a  person  had  a  right  to  dispose  of  property  in  trust  either 
by  will  or  deed ;  that  the  declaration  of  trust  affected  only  such 
property  as  was  delivered  to  the  trustees ;  that  the  petition  was 
wrongfully  brought  and  was  properly  dismissed.  The  points 
in  the  case  are  discussed  in  the  decision  which  in  substance  is 
as  follows: 

8 — Trustees  Take  Title  at  Time  of  Bxeciition  and  Delivery- 

The  plaintiff  was  the  widow  of  one  Harry  Haulman;  the  de- 
fendants were  the  executors  of  his  will.  The  action  v/as 
brought  by  the  plaintiff  to  have  the  defendants  removed  as 
executors  of  the  will  on  the  ground  that  they  had  in  their  pos- 
session a  certain  sum  of  money  received  by  them  from  Harry 
Haulman  before  his  death,  as  she  alleged  under  some  sort  of 
an  an-angement  between  them,  by  which  they  were  to  pay  to 
the  deceased  interest  upon  the  money  held  by  them;  tliat  they 
failed  to  account  for  the  same  as  any  portion  of  the  estate; 
that  they  filed  an  inventory  of  the  personal  property  of  the 

35  Lynn  V.  Lynn,  135  111.  18.  86  164   la.  471,  145  N.  W.  930. 


Deed  of  Trust.  9 

[HAULMAN    V.    HAULMAN.] 

said  Harry  Haulman  and  therein  made  no  mention  of  the 
money  so  received  and  held  by  them.  The  defendants  an- 
swered plaintiff's  petition  by  setting  forth  that  the  money  so 
held  by  them  was  no  part  of  the  estate  of  Harry  Haulman  but 
was  a  trust  estate ;  that  the  will  executed  by  Harry  Haulman  at 
the  time  of  the  execution  of  the  trust  instrument  was  duly  pro- 
bated and  that  the  plaintiff  elected  to  take  her  distributive  share 
in  the  estate  of  the  said  Harry  Haulman.  The  plaintiff  then 
filed  the  following  motion:  "And  now  comes  Mary  C.  Haul- 
man,  widow  of  Harry  Haulman,  deceased,  and  upon  the  answer 
of  executors  to  petition  of  Mary  C.  Haulman  for  their  removal, 
and  the  admissions  in  said  answer  contained,  moves  this  honor- 
able court  to  order,  adjudge,  and  decree  that  said  Mary  C. 
Haulman  is  entitled  to  a  one-third  interest  in  all  the  property 
of  said  Harry  Haulman,  including  the  $2,500  in  said  answer 
mentioned,  and  that  the  said  executors  be  required  to  amend 
their  inventory  filed  herein  so  as  to  include  said  $2,500  therein." 
The  motion  was  denied ;  the  court  especially  finding  that  the 
$2,500,  with  its  accumulations,  mentioned  in  the  trust  deed, 
was  no  part  of  the  estate  of  Harry  Haulman,  and  that  the 
plaintiff  was  not  entitled  to  participate  therein.  From  this  or- 
der, the  appeal  was  taken. 

The  appellant  relied  upon  five  points  for  reversal : 
(i)     There  was  no  executed  gift  by  virtue  of  the  trust  in- 
strument, for  an  executed  gift  is  inconsistent  with  the  declara- 
tion of  trust. 

(2)  A  trust  instrument  vests  in  the  trustees  only  such  es- 
tate as  is  necessary  to  enable  them  to  execute  the  trust. 

(3)  Equity  will  not  interpose  to  perfect  a  defective  gift  or 
voluntary  settlement. 

(4)  The  instrument  was  not  executed  in  compliance  with 
the  statute  governing  wills,  and  therefore  was  ineffective  as  a 


10  Trusts  for  Business  Purposes.. 

[HAULMAN    V.    H^VULMAN.] 

testamentary  disposition  of  property.  It  was  equally  ineiTectivc 
to  evidence  a  gift  inter  vivos. 

(5)  The  fact  that  in  the  will  testator  required  the  trustees 
to  "keep  and  care  for  my  property  the  same  as  I  have  this  day 
directed  them  to  do  in  an  article  of  trust  and  that  they  follow 
out  the  provisions  of  said  trust  fully,  and,  at  the  end  of  five 
years  from  my  decease  that  they  make  an  equal  distribution  of 
my  property  to  my  children,"  does  not  make  the  trust  instru- 
ment a  part  of  said  will,  and  so  give  to  said  instrument  vitality 
as  a  testamentary  disposition  of  property.  The  court,  in  dis- 
posing of  the  points  raised  by  appellant,  in  substance  said  that 
a  proper  determination  of  the  controversy  involved  a  construc- 
tion of  the  declaration  of  trust  and  the  will;  the  rights  of  the 
parties  to  the  money  in  controversy  had  to  be  determined  from 
a  consideration  of  these  instnunents  alone. 

There  is  no  question  but  that  any  property,  real  or  personal, 
may  be  transferred  and  conveyed  by  the  owner  to  a  trustee,  to 
be  held  by  the  trustee  for  the  use  and  benefit  of  others ;  that  the 
owner  of  property  may  transfer  the  legal  title  to  another,  to  be 
held,  controlled,  and  managed  by  the  other  for  the  use  and 
benefit  of  others  designated  by  him. 

It  is  true  that,  where  the  use  and  benefit  and  enjoyment  of 
the  thing  conveyed  is  deferred  until  after  the  death  of  the 
owner,  and  where,  by  the  terms  of  the  instrument,  the  convey- 
ance does  not  become  effectual  until  after  the  death  of  the 
grantor,  and  the  legal  title  remains  in  the  grantor  until  such 
time,  the  instrument  is,  of  necessity,  testamentary  in  its  char- 
acter, and  can  be  enforced  only  as  such. 

To  make  it  efifectual,  the  instrument  of  conveyance  must  op- 
erate in  praesenti.  It  must  transfer  the  title,  dominion,  and 
control  over  the  thing  to  the  trustee  at  the  time  of  its  execution 
and  delivery,  and,  when  this  is  done,  the  enjoyment  of  the  thing 


Deed  oe  Trust.  ii 

[HAULMAN    v»  HAULMAN.] 

conveyed  may  be  postponed  until  after  the  death  of  the  grantor, 
or  postponed  to  any  future  time.  Tlie  benefits  to  be  derived 
from  the  grant  may  be  postponed,  without  the  instrument  losing 
any  of  its  efficiency  as  a  trust  instrument,  or  without  afifecting, 
in  the  least,  the  trust  character  of  the  conveyance.  In  all  in- 
struments where  a  trust  is  created  in  one  for  the  use  and 
benefit  of  another,  the  party  creating  the  trust  must  release  all 
power  of  disposition  over  the  fund. 

9 — Who  May  Create. 

It  is  fundamental  law  that  any  person  of  lawful  age  and 
sound  mind  has  a  legal  right  to  turn  over  personal  property  of 
whatever  character  into  the  hands  of  another,  to  be  held  and 
used  for  the  benefit  of  some  person  designated  therein  as  bene- 
ficiary, and  that,  when  this  is  done,  whether  by  written  instru- 
ment or  parol,  the  beneficiary  obtains  an  immediate  and  vested 
interest  in  the  subject  of  the  trust,  and  the  party  creating  the 
trust  cannot  revoke  or  disaffirm  the  same,  unless  such  power 
of  revocation  has  been  reserved,  in  express  terms,  at  the  time 
of  the  creation  of  the  trust.  The  owner  of  personal  property 
has  the  absolute  right  to  dispose  of  it  to  whomsoever  he  sees 
fit,  with  or  without  consideration  and  subject  only  to  those  lim- 
itations as  to  creditors,  and  such  a  disposition,  when  fully  con- 
summated, becomes  binding  upon  him  and  upon  all  claiming  by, 
through,  or  under  him.^"^ 

As  said  in  Cameron  v.  Cameron  :^^  "In  a  case  of  this  kind 
the  only  inquiry  need  be  whether  the  deed  of  the  husband  is 

37  Jones  V.  Nicholas,  151  Iowa  549,    42    N.    W.    439;     Lewis    v. 

362,    130    N.    W.    125;     Love    v.  Curnutt,    130    Iowa    423,    106    N. 

Blauw,  61  Kan.  496,  59  Pac.  1059,  W.   914. 

48  L.  R.  A.  257,  78  Am.  St.  Rep.  38  Reported    in    10    Smedes    & 

334;    Forney  v.  Remey,  77  Iowa  .M.   (Miss.)   394,  48  Am.  Dec.  759. 


12  Trusts  for  Business  Purposes. 

[HAULMAN    V.    HACLMAN.] 

absolute  and  irrevocable  or  not.  It  is  the  undoubted  right  and 
privilege  of  a  husband  to  dispose  of  his  personal  estate  in  any 
manner  he  thinks  proper  in  his  own  lifetime,  and  thus  to  cut 
off  his  widow  from  dower  in  such  property ;  and  a  voluntary 
conveyance  will  be  good  against  the  claims  of  the  widow." 

10 — Trust  May  Be  Created  By  Will  or  Deed. 

In  determining  whether  an  instrument  is  a  deed  or  a  will,  the 
main  question  is :  Did  the  maker  intend  to  convey  an  estate  or 
interest  tliat  should  vest  before  his  death,  and  immediately  upon 
the  execution  of  the  instrument,  or  did  he  intend  that  all  the 
interest  and  estate  afiected  by  the  instrument  should  pass  only 
after  his  death?  If  the  instrument  passed  a  present  estate, 
and  passed  the  title  and  right  to  possession  to  the  property 
involved,  immediately  upon  its  execution  to  the  trustee  named 
therein,  it  is  effectual,  although  the  enjoyment  of  the  thing 
conveyed  in  the  parties  named  as  beneficiaries  is  postponed  to 
a  future  date.  All  that  is  necessary  is  that  the  donor  or  grantor 
should  have  absolutely  parted  with  his  interest,  and  have  ef- 
fectually put  such  interest  beyond  his  reach.^^ 

In  Re  Estate  of  Podhajsky,*°  it  is  said:  "It  is  immaterial 
whether  we  call  the  transaction  now  under  consideration  (and 
we  might  remark  this  is  a  case  very  much  like  the  one  at  bar) 
a  gift  by  the  deceased  to  his  daughters,  or  a  trust  established 
by  him  for  their  benefit.  Indeed,  a  voluntary  trust  is  simply  a 
device  by  w4iich  a  donor  effectuates  a  gift,  either  of  property 
or  of  its  beneficial  use  and  enjoyment,  to  a  designated  donee. 

39Vosburg     V.     Mallory,     155  rico,  140   Ind.   533,   40  N.  E.  50, 

Iowa  165,   135  N.  W.   577;   Lane  49  Am.  St.  Rep.  213. 

V.  Ewing,  31  Mo.  75,  77  Am.  Dec.  40  137  Iowa  742,  115  N.  W.  590. 
632.      See    also,    Wilson    v.    Car- 


Deed  of  Trust.  13 

[HAULMAN   V.    HAULMAN.] 

Even  a  gift  oiusa  mortis  may  be  effected  by  delivery  to  a  third 
person  in  trust  for  the  donee,  although  the  gift  does  not  come 
to  the  knowledge  of  the  donee,  and  is  not  accepted  by  him 
until  after  the  death  of  the  donor.  The  acts  of  the  trustee  or 
third  person  receiving  the  property  for  the  benefit  of  the  donee 
are  deemed  to  be  in  the  interest  of  the  latter,  and  the  acceptance 
of  the  gift  is  presumed."*^ 

It  has  even  been  held  that  a  reserved  power  in  the  grantor  to 
recall  the  grant  which  has  not  been  exercised  during  the  life 
of  the  grantor,  does  not  destroy  the  effectivenes.^5  of  the  grant.*^ 

In  Lewis  v.  Curnutt,  supra,  the  court  said :  "The  same  pur- 
pose to  direct  and  control  the  disposition  of  property  beyond 
the  life  of  the  owner  is  very  frequently  accomplished  through 
a  trustee  who  may  be  appointed  by  will,  or  by  deed,  or  by  other 
suitable  declaration  of  trust.  Subject  only  to  the  condition  that 
the  purpose  of  the  trust  be  not  in  contravention  of  the  com- 
mand or  policy  of  the  law,  the  right  and  power  of  the  owner  of 
property  to  thus  dispose  of  it  is  elementary."*^ 

The  general  rule  is  that  one  may  do  with  his  property  as  he 
pleases.  He  may  dispose  of  it  by  will  in  any  way  that  suits 
his  fancy  or  his  judgment.  He  may  give  it  all  to  a  stranger 
and  thus  disinherit  his  relatives.  He  may  give  it  all  to  natural 
persons  or  to  corporations  capable  of  taking.  He  may  give  it 
directly,  or  create  trusts  which  the  law  allows ;  and  this  general 
power  of  disposition  he  possesses  down  to  the  last  hour  of 
conscious,  intelligent  existence.     Whether  the  trust  be  created 

41  Clough  V.  Clou^,  117  Mass.  42  Lippold      v.      Lippold,      112 

83;    Gerrish    v.    Institution,    128  Iowa  134,  83  N.  W.  809,  84  Am. 

Mass.  159,  35  Am.  Rep.  365.    See  St.  Rep.  331;   Newton  v.  Dealer, 

also,    Dettmerr   v.    Behrens,   106  41  Iowa  334. 

Iowa  585,  76  N.  W.  853,  68  Am.  43  Hollis    v.    Drew    Seminary, 

St.  Rep,  326.  95  N.  Y.  166. 


14  Trusts  for  Business  Purposes 

[HAULMAN    V.    HAULMAN.] 

bv  will  or  by  deed,  if  it  be  lawful — and  the  intent  can  be  fairly 
ascertained  from  the  examination  of  the  instrument — the  courts 
will  uphold  and  enforce  it,  for  the  intent  of  the  settlor  in  tlie 
creation  of  trusts  is  w^hat  the  courts  look  to,  and  that  intent  is 
to  be  carried  into  effect,  unless  it  contravenes  some  public  policy 
of  the  law.  It  is  further  said  in  I^ewis  v.  Curnutt,  supra : 
"Moreover,  it  must  be  remembered  that  it  is  not  necessary  in 
any  case  to  the  establishment  of  a  trust  that  any  beneficial  in- 
terest shall  pass  to  the  trustee.  From  its  very  nature,  a  trust 
involves  the  idea  of  a  separation  of  the  beneficial  interest  from 
the  legal  title.  When  a  trust  is  executed  by  the  delivery  of  a 
simple  conveyance  to  the  trustee,  that  act  and  instrument  serve 
to  pass  an  immediate  present  interest  to  the  cestui  que  trust, 
no  matter  how  far  in  the  future  tlie  enjoyment  of  the  benefit 
thus  provided  may  be  deferred." 

1 1 — Trust  Distinguished  from  a  Gift. 

In  Forney  v.  Remey,**  it  was  expressly  decided  that  one 
owning  property,  real  or  personal,  may  transfer  and  convey 
the  same  to  a  trustee,  to  be  held  for  his  own  benefit,  or  for 
other  beneficiaries.  The  instrument  in  this  Forney  Case,  upon 
its  face,  was  a  conveyance  in  trust  for  the  benefit  of  the  grantor 
and  others  who  were  named  as  beneficiaries  upon  the  face  of 
the  instrument.  The  instrument  assigned,  transferred,  and 
conveyed  certain  accounts  and  personal  property  to  a  certain 
person  named  as  trustee,  a  schedule  of  which  was  attached. 
Following  the  naming  of  the  trustee,  and  the  transfer  of  the 
property  in  the  instrument  set  out,  the  trustor  made  provision 
that  the  trustee  named  in  the  instrument  should  hold  the  prop- 
erty, and,  after  deducting  from  the  interest,  rents,  income,  and 

44  77   Iowa   549,  42   N.   W.   439. 


Deed  01^  Trust.  15 

[HAULMAN    V.    HAULMAN.] 

profits  any  expense  attending  the  execution  of  the  trust,  the 
trustee  should  pay  to  the  trustor  all  the  interests,  rent,  and  in- 
come, and  profits  arising  from  such  property,  such  payments 
to  be  made  during  her  natural  life,  and  at  the  death  of  the  donor 
or  trustor  the  property  to  be  distributed  among  those  named 
therein  as  beneficiaries.  The  court  said:  "The  plaintiff's 
counsel  insist  that  the  instrument  witnesses  a  gift  inter  vivos 
*  *  *  is  not  valid,  for  the  reason  that  it  is  testamentary  in  its 
character.  It  is  plain  that  the  conveyance  is  not  a  gift  inter 
vivos.  The  grantor  herself  is  named  as  the  first  beneficiary,  re- 
taining the  power  to  direct  the  investment  of  the  funds  arising 
from  the  property.  The  other  beneficiaries  can,  under  the  in- 
strument, receive  no  benefits  from  the  property  until  after  the 
death  of  the  grantor.  Nothing  further  need  be  said  in  order  to 
refute  utterly  plaintiff's  position  that  the  instrument  witnesses  a 
gift  inter  vivos."  Further:  "The  property,  under  the  instru- 
ment, passes  to  the  defendant,  who  takes  it  as  a  trustee,  and 
holds  it  subject  to  the  terms  of  the  trust.  The  title  passes— in 
praesenti ;  it  does  not  await  the  death  of  the  grantor.  She  lost 
ownership  and  control  of  the  property  by  the  execution  of  the 
deed.  There  is  nothing  in  the  conveyance  suggesting  an  ide;i 
of  a  future  power  of  disposition  retained  by  the  grantor.  She 
could  not  revoke  the  grant,  nor  in  any  way  change  its  terms  and 
conditions." 

Many  more  cases  might  be  cited  in  support  of  the  defendants' 
claim ;  but  the  court  did  not  deem  it  necessary  to  make  refer- 
ence to  them,  for  the  reason  that  every  question  raised  in  the 
case  had  been  fully  and  fairly  met  and  decided  by  the  court, 
and  each  case  was  amply  supported  by  well-considered  cases 
from  other  states. 

The  question  in  this  case  then  is :  Do  the  instruments  herein 
relied  upon  meet  the  requirements  of  the  law  as  hereinbefore 


i6  Trusts  for  Business  Purposes. 

[HAULltfAN   T.    HAULMAN.] 

Stated  ?  The  instrument  under  consideration  provides :  'T 
will  place  in  the  hands  of  my  two  sons,  H.  E.  Haulmaii  and 
B.  T.  Haulman,  the  sum  of  $2,500.00."  It  appears  that  on  the 
date  of  the  execution  of  this  instrument  he  did  place  $2,500  in 
the  hands  of  these  two  sons.  It  appears  that  he  placed  this 
money  in  their  hands  as  trustees,  not  only  of  that  sum,  but 
any  and  all  other  sums  that  might  be  added  to  it ;  that  he  placed 
it  in  trust  with  them  for  the  use  and  benefit  of  his  children 
named  in  the  instrument. 

Harry  Haulman,  the  creator  of  the  trust,  had.  at  the  time  the 
instrument  was  executed,  $2,500  in  money ;  he  paid  this  money 
to  the  defendants,  to  be  held  by  them  in  trust  for  his  children ; 
by  the  instrument,  he  created  them  trustees  of  the  fund,  and 
retained  no  control  over  the  fund,  no  right  to  withdraw  it  from 
their  hands,  or  direct  its  disposition  other  than  is  shown  in  the 
instrument  creating  the  trust.  This  money,  so  delivered  to 
these  trustees,  was  never  withdrawn  by  Harry  Haulman.  and 
was  in  the  hands  of  the  defendants,  as  trustees,  under  the  trust 
instrument,  at  the  time  this  action  was  commenced.  It  is  true 
that  in  the  instrument  he  directed  his  trustees  as  to  the  manage- 
ment of  the  fund,  but  assumed  no  control  over  the  management 
of  it  himself,  and  directed  his  trustees,  upon  his  death,  to  dis- 
tribute the  fund  to  the  beneficiaries  named  in  the  trust  deed, 
as  therein  provided. 

It  is  true  that  the  trust  deed  and  the  will  undertake  to  dis- 
pose of  and  control  property  not  shown  to  have  been  in  exist- 
ence at  the  time  of  the  making  of  the  trust  deed  and  will,  and 
property  which  does  not  appear  to  have  ever  been  delivered  by 
him  to  the  trustees.  This  does  not  affect  the  trust  character 
of  the  property  in  controversy,  which  was,  in  fact,  delivered  to 
and  retained  by,  the  trustees  under  the  trust  deed,  and  which  is 
the  property  in  controversy  here.    The  will  in  no  way  changes 


Dti.T>  OF  Trust.  17 

[HATJLMAN   v.    HAULltfAN.] 

or  attempts  to  change  the  disposition  of  this  fund  in  the  hands 
of  the  trustees.  Nor  is  it  in  any  way  inconsistent  with  the  pro- 
visions of  the  trust  deed. 

Thus  a  proper  construction  of  this  instrument  shows  tliat  the 
property  in  controversy  under  the  instrument  in  question 
passed  to  these  defendants  as  trustees;  that  they  took  it,  and 
were  holding  it  at  the  time  this  action  was  commenced,  subject 
to  the  terms  of  the  trust ;  that  the  title  to  this  money  passed  to 
these  trustees  immediately  upon  the  execution  and  delivery  of 
the  trust  deed  and  the  property;  that  the  maker  of  the  trust 
deed  retained  no  personal  control  over  the  property  after  the 
execution  of  the  instrument  and  the  delivery  of  the  same  to 
the  trustees;  that,  by  the  execution  and  delivery  of  the  deed 
and  the  property  to  these  trustees,  he  then  lost  ownership  and 
control  of  the  property.  The  instrument  itself  suggests  that 
he  retained  no  power  over  the  property  that  would  enable  him, 
in  the  future,  to  make  any  other  different  disposition  than  was 
provided  for  in  the  instrument.  He  could  not  revoke  it,  or  in 
any  way  cliange  its  terms  and  conditions.  The  legal  title  passed 
to  the  trustees.  The  beneficial  interest  passed  to  his  children. 
Both  the  legal  title  and  the  beneficial  interest  passed,  upon  the 
delivery  of  the  instrument  and  the  other  property,  to  the 
trustees,  and  the  instrument  itself  shows  that  that  was  his  pur- 
pose and  intent.  He  had  a  legal  right  to  make  the  instrument 
at  the  time.  He  had  a  legal  right  to  transfer  the  property  direct, 
if  he  chose,  to  the  beneficiaries  named  therein.  If  he  had  done 
so,  no  question  could  possibly  have  arisen  such  as  we  have 
before  us  now.  He  chose,  however,  to  pass  the  legal  title  to 
these  defendants,  and  the  beneficial  interest  to  the  beneficiaries 
named  in  his  deed.  Having  parted  with  both,  nothing  remained 
in  him,  at  the  time  of  his  death,  that  could  possibly  pass  to  his 
executors  under  the  will. 


i8  Trusts  for  Business  Purposes. 

THAULMAN    V.    HAULMAN.l 

The  cases  cited  by  counsel  for  appellant  fail  to  support  their 
position  that  the  instrument  in  question  is  not  a  trust  deed,, 
operating  in  praesenti.  The  instrument  itself,  upon  its  face, 
under  the  holdings  of  this  court  heretofore  referred  to,  shows 
that  the  instrument  is  not  a  testamentary  writing,  and  does 
not  witness  a  gift  inter  vivos.  Without  reviewing  the  cases 
cited  by  appellant,  we  are  satisfied  with  the  holdings  of  this 
court  heretofore  made,  which  an  examination  shows  are  amply 
supported  by  the  best  authority. 

The  court  decided  that  the  trust  was  valid;  that  the  lower 
court  properly  dismissed  the  plaintifit's  petition. 

1 2 — Amendment. 

When  once  a  trust  has  been  effectually  created,  it  cannot 
afterwards  be  altered  or  revoked  by  the  person  who  created 
it;*^  nor  can  the  trustees  or  the  court,  to  promote  better  the 
interests  of  the  beneficiaries,  change  or  alter  the  trust,  because 
the  judgment  of  the  settlor  in  respect  to  the  matter  is  the  law 
of  the  trust  ;*^  nor  can  the  trustees  by  subsequent  declarations 
or  agreements  modify,  vary,  or  amend  the  original  trust,  if  the 
trust  instrument  does  not  provide  for  such  modification.*' 
While  all  the  parties  in  interest — providing  they  are  of  legal 
age — may  terminate  the  trust,  they  have  the  same  right  to  vary, 
amend  and  modify  as  in  any  other  contract.*^ 

The  general  rule  is  that  once  a  trust  is  created  and  put  into 
operation,  it  cannot  be  amended,  this  does  not  apply  where  the 

45  Skeen  v.  Marriott,  22  Utah  48  Klugh  v.  Seminole  Secur- 
73,  61  Pac.  296.  ities  Co.,  103  S.  C.  120,  87  S.  E. 

46  Upliam  V.  Plankinton,  152  644.  See  Trust  Estates — Sears 
Wis.  275,  140  N.  W.  5.  2nd.    Ed.    370-97.      See    Note    47 

47  Burling  v.  Newlands,  112  L.  R.  A.  136  for  amendments 
Cal.  476,  44  Pac.  810.  to  beneficial   associations. 


Dked  of  Trust.  19 

instrument  itself  specifically  provides  for  amendments.  A 
person  with  power  to  create,  without  doubt,  may  provide  for 
amendments  necessary  to  carry  out  the  spirit  of  the  trust  so 
long  as  no  vested  rights  under  the  trust  are  afifected  or  im- 
paired. The  trust  agreement  may  provide  that  amendments 
be  inade  by  the  trustees  and  ratified  by  all  or  by  a  majority  of 
them ;  or  it  may  provide  that  amendments  be  made  by  the 
trustees  and  ratified  by  two-thirds  or  a  majority  of  the  share- 
holders. A  great  number  of  trusts  have  been  before  the  courts 
which  had  provisions  in  them  for  modification  or  termination 
of  the  instrument  by  a  majority  or  two-thirds  of  the  share- 
holders. In  one  there  was  a  provision  that  two-thirds  of  the 
sliareholders  by  a  vote  at  a  meeting  called  for  the  purpose, 
might  sooner  terminate,  or  renew  the  trust.*^  In  another  it  was 
provided  that  with  the  written  consent  of  a  majority  in  interest 
of  the  beneficiaries,  a  vacancy  among  the  trustees  might  be 
filled,  or  the  trust  itself  might  be  modified.^" 

13 — Notice — Recording. 

The  object  in  recording  an  instrument  is  to  give  notice  to 
all  people  of  the  interest  and  rights  one  has  in  reference  to 
the  document  recorded.  The  acts  of  the  state  in  which  a  trust 
has  its  principal  office  would  be  the  determining  factor  in  re- 
cording the  declaration  of  a  trust  organized  solely  for  the  pur- 
pose of  dealing  in  and  holding  personal  property.  If  there  is 
any  provision  in  a  trust  for  the  present  or  future  holding  of  or 
dealing  in  real  estate,  it  must  be  recorded  the  same  as  any  other 
deed.     People  have  the  right  to  know,  and  should  know,  with 

49  Davis  V.  Hudgius,  (Tex.)  223,  63  L.  Ed.  573,  2  A.  L.  R. 
225   S.  W.  73.  1601,  39   Sup.   Ct.   270. 

60  Crocker  v.  Malley,  249  U.  S. 


20  Trusts  for  Business  Purposes. 

whom  they  are  deahng;  and  for  that  reason  the  trust  instru- 
ment in  Hmiting  the  habihty  of  the  trustees  should  provide  for 
actual  notice  to  all  people  who  contemplate  doing  or  actually  do 
business  with  the  trust.  This  actual  notice  should  be  brought 
home  to  all  parties  by  a  clause  in  the  trust  itself,  and  all  con- 
tracts and  documents  should  specifically  state  that  the  trustees 
act  in  their  trust  capacity  only.  Where  the  act  does  not  defi- 
nitely provide  for  recording,  it  is  not  sufficient  notice  to  third 
parties  to  record  the  declaration  of  trust;  personal  notice  should 
be  given  in  addition.  The  question  of  personal  notice  cannot 
be  overly  emphasized;  the  rule  is  to  record  the  declaration  of 
trust  and  also  provide  for  personal  notice  to  all  parties  who 
deal  with  the  trust  through  its  trustees. 

14 — Seal — Definition  and  History. 

A  seal  is  the  impression  made  on  a  document  by  an  instru- 
ment such  as  an  engraved  metallic  plate.  At  common  law  and 
in  earlier  times,  a  seal  meant  an  impression  made  on  wax  or 
other  material  which  would  take  and  retain  an  impression. 
Seals  were  introduced  by  the  Normans  and  used  in  fact  as  a 
signature  at  a  time  when  each  man  had  his  signet  and  es- 
cutcheon with  engraving  designating  the  individual.  Lord  Coke 
said  a  seal  was  wax  with  an  impression ;  when  this  was  true 
in  the  early  part  of  the  seventeenth  century,  the  question  of 
seal  or  no  seal,  deed  or  no  deed,  was  matter  to  be  decided  by 
inspection.  In  process  of  time  other  materials  than  wax  were 
used,  but  the  impression  was  still  considered  as  important  and 
its  existence  was  still  to  be  tried  by  inspection.  Later,  the 
scroll  seems  to  have  been  used  habitually  as  a  seal,  even  before 
statutes  on  the  subject.^^ 

61  Cromwell   v.   Tate,   7   Leigh    (Va.)    301,  30  Am,  Dec.  506. 


Deed  of  Trust.  21 

The  right  on  an  individual  to  use  a  seal  has  never  been  chal- 
lenged,^^ the  decisions  universally  assume  that  where  the  in- 
dividual adopts  and  uses  a  seal  it  is  done  as  a  matter  of  right. 
The  trustee  being  an  individual  and  a  citizen,^^  unquestionably 
has  the  right  to  adopt  and  use  a  seal ;  once  a  seal  has  been  used 
the  presumption  is  that  the  use  is  lawful.^*  If  the  trustee  con- 
templates the  use  of  a  seal,  the  declaration  of  trust  should  es- 
pecially provide  for  such  use.  The  sealing  of  an  instrument  is 
a  prima  facie  evidence  that  it  has  been  duly  executed ;  that  the 
seal  -was  used  by  the  proper  officers  is  not  conclusive  as  it  may 
be  shown  that  it  was  not  affixed  officially.^^  As  to  informal 
documents,  the  use  of  the  seal  has  been  abolished  by  statute  in 
nearly  all  of  the  states;  for  that  reason  the  statute  of  the  state 
in  which  the  trust  is  to  maintain  its  home  office,  should  be 
consulted  in  the  drawing  of  a  declaration  of  trust. 

15 — Termination  of  Trust. 
(a)     By  Instrument. 

Usually  the  life  of  a  trust  should  be  provided  for  in  the  in- 
strument together  with  the  manner  and  time  of  termination — 
the  latter  not  to  violate  the  rule  of  perpetuities.  Where  the  in- 
strument recites  the  time  of  expiration  and  it  is  not  in  violation 
of  law,  the  court  cannot,  before  expiration  of  the  term  of  a 
trust,  decree  dissolution  without  consent  of  all  parties  in  in- 
terest.^^  It  is  a  general  rule  that  a  valid  trust  in  property 
created  with  intention  expressed  or  necessarily  implied  that  it 

52  Johnson  v.  Crawley,  25  Ga.  111.  655,  26  N.  E.  640,  25  A.  S.  R. 
316,  71  Am.  Dec.  173.  401. 

63  See   Chapters   on   Interstate  55  24  R.  C.  L.  695. 

Commerce   and    Validity.  66  Metcalfe     v.     Union     Trust 

64Mullanphy     v.     Schott,     135      Co.,  87  App.   Div.  144,   85   N.  Y. 

Sup.  183. 


22  Trusts  for  Business  Purposes. 

shall  endure  for  a  specified  time  and  for  specified  objects,  is  due 
to  be  carried  out  according:  to  such  intent.^"' 


'& 


(b)  By  Trustor. 

As  a  general  rule  the  trustor  loses  control  over  the  property 
deeded  in  trust,  and  his  right,  powers  and  duties  as  such  donor 
are  at  an  end  when  the  trust  is  complete.  The  fact  that  a  deed 
creating  a  trust  contains  no  power  of  revocation,  and  is  with- 
out consideration  and  voluntary,  is  not  sufficient  grounds  for 
setting  it  aside  at  a  suit  of  the  trustor. ^^  In  a  suit  by  a  settlor 
to  set  aside  a  deed  creating  a  trust  which  contains  no  power  of 
revocation,  evidence  should  be  conclusive  to  show  that  the  ab- 
sence of  a  power  of  revocation  was  due  to  a  mistake  or  mis- 
understanding on  the  part  of  complainant;^^  for  once  a  trust 
has  been  effectually  created,  it  cannot  afterwards  be  altered  or 
revoked  by  the  person  who  created  it.®® 

(c)  By  Trustees. 

Where  a  trust  has  been  created  and  a  trustee  appointed  and 
given  possession  of  the  trust  estate,  the  trust  cannot  be  de- 
stroyed by  the  failure  or  omission  of  the  trustee  to  perform 
all  of  his  duties  promptly.  Acts  of  omission  of  the  trustee  in 
performing  the  details  of  the  trust  will  not  destroy  it.®^  The 
trustees  have  no  right  or  power  to  terminate  the  trust;  but 
where  the  trust  has  been  legally  terminated,  the  trustee  may 


67  Upham    V.    Plankinton,    152  60  Skeen  v.  Marriott,   22  Utah 
Wis.  275,  140  N.  W.  5.  73,  61  Pac.  296. 

68  Dayton   v.    Stewart,    99    Md.  61  Bay   Biscayne   Co.   v.   Baile, 
643,  59  Atl.  281.  73  Fla.  1120,  75  So.  860. 

69  Dayton   v.   Stewart,   Supra. 


De;ed  of  Trust.  23 

invoke   the    jurisdiction    of    equity    to    partition   the    property 
among  the  beneficial  owners.^*^ 

(d)  By  Beneficiaries. 

An  active  trust  which  requires  the  exercise  of  discretion  by 
the  trustee,  cannot  be  terminated  at  the  will  of  the  benefi- 
ciaries;^^ but  if  all  the  parties  interested  in  the  trust  property 
are  sui  juris,  the  trustees  and  beneficiaries  may,  by  agreement, 
terminate  the  trust.^*  This  rule,  of  course,  would  not  apply 
where  any  of  the  parties  are  under  disability,  or  where  the 
settlor  makes  known,  expressly  or  plainly,  his  intention  that 
such  power  should  not  exist  ;^^  or  where  some  of  the  parties 
are  infants.^^ 

(e)  from  Other  Cause. 

Regardless  of  the  nominal  duration  of  an  estate  given  to  a 
trustee,  it  continues  in  equity  no  longer  than  the  thing  sought 
to  be  secured  by  the  trust  demands.  When  that  demand  has 
been  fully  satisfied,  and  although  the  trust  may  not  have  ceased 
by  expiration  of  time,  if  all  the  parties  who  are  or  who  may  be 
interested  in  the  trust  property  are  in  existence  and  are  sui 
juris  and  they  agree  thereto,  a  court  of  equity  may  decree  the 
termination  of  the  trust.^''  The  termination  or  satisfaction  of  a 
trust  may  be  presumed  from  lapse  of  time  or  gross  laches  in 
its  enforcement  amounting  to  acquiescence.^^     No  trust  can 

62Rackem.ann    v.    Tilton,    236  66  Anderson    v.    Williams,    262 

111.  49,  86  N.  E.  168.  111.  308,  104  N.  E.  059. 

63  Easton  v.  Demuth,  179  Mo.  67  In  Re  Stafford's  Estate,  258 
App.  722,  162  S.  W.  294.  Pa.   595,   102   Atl.   222. 

64  Cowie  V.  Strohmeyer,  150  68  Jones  v.  Haines,  79  N.  J. 
Wis.   401,   136   N.   W.   956.  Eq.   110,   80  Atl.   943. 

65  Cowie  V.  Strohmeyer,  Supra. 


24  Trusts  for  Business  Purposes. 

survive  the  purpose  of  its  creation,  when  that  is  accomplished 
it  must,  of  necessity,  terminate.^^ 


1 6 — Rule  Against  Perpetuities. 

A  perpetuity  is  defined  to  be  a  limitation  taking  the  subject 
thereof  out  of  commerce  for  a  longer  period  of  time  than  a 
life  or  lives  in  being  and  twenty-one  years  beyond,  and,  in  case 
of  a  posthumous  child,  a  few  months  more — ^allowing  for  the 
time  of  gestation.  Gilbert,  in  his  treatise  on  Uses,  defines  it  to 
be  such  a  limitation  of  property  as  renders  it  inalienable  be- 
yond the  period  allowed  by  law.  Lewis,  in  his  treatise  on  Per- 
petuities, defines  it  to  be  "a  future  limitation,  whether  execu- 
tory or  by  way  of  remainder,  and  of  either  real  or  personal 
property,  which  is  not  to  vest  until  after  the  expiration  of,  or 
will  not  necessarily  vest  within,  the  period  fixed  and  prescribed 
by  law  for  the  creation  of  future  estates  and  interests,  and 
which  is  not  destructible  by  the  persons  for  the  time  being  en- 
titled to  the  property,  subject  to  future  limitation,  except  with 
the  concurrence  of  the  individual  interested  under  that  limi- 
tation."70 

The  true  object  of  the  rule  against  perpetuities  is  to  prevent 
the  creation  of  interests  on  remote  contingencies.  Its  efifect  in 
removing  restrictions  on  the  immediate  conveyance  of  property 
is  only  an  incident.  It  is  not  the  alienability  of  an  interest  de- 
pendent on  a  remote  contingency,  but  its  utterly  uncertain  value, 
which  furnished  the  sufficient  justification,  if  it  was  not  the 
original  ground,  of  the  rule  against  perpetuities.     If  there  is  a 

69  Kahn   v.   Tierney,   135   App.  70  Waldo  v.  Cummings,  45  111. 

Div.  897  Sup.  Ct.,  120  N.  Y.  Sup.  421;    Hart   v.    Seymour,   147    111, 

663;  Winters  v.  March,  139  Tenn.  598,  35  N.  E.  246. 
496,  202  S.  W.  73. 


Deed  of  Trust.  25 

gift  over  of  an  estate  on  a  remote  contingency,  the  market 
value  of  the  interest  of  the  present  owner  will  be  greatly  re- 
duced, while  the  executory  gift  will  sell  for  very  little;  or  in 
other  words,  the  value  of  the  present  interest  plus  the  value 
of  the  executory  gift  will  fall  far  short  of  what  would  be  the 
value  of  the  property  if  there  were  no  executory  interest.''^ 

In  the  case  of  Edgerly  v.  Barker,  in  discussing  the  rule 
against  perpetuities,  the  court  in  substance  said  that  while  the 
reasons  for  the  rule  are  not  fully  stated  generally,  its  applica- 
tion may  require  a  wide  view  of  public  policy,  including  the 
legal  nature  and  design  of  property,  the  reasonable  extent  of 
any  owner's  posthumous  control,  and  the  economic  and  moral 
effects  of  realty  and  personalty  being  largely  held  in  trusts  of 
long  duration  for  mere  accumulation  or  for  purposes  of  en- 
tailment. Divers  evils  could  be  materially  increased  and  unduly 
perpetuated  if  the  law  allowed  long-continued  accumulations  of 
estates  in  trust  for  future  private  use,  or  appropriations  to 
maintain  grantees  or  legatees  and  their  heirs  forever  or  for 
many  generations,  without  effort  or  care  on  their  part  and 
without  ability  to  waste  or  lose  the  capital  devoted  to  their 
support. 

The  most  universal  and  effectual  way  of  abandoning  property 
is  by  death  of  the  occupant,  when — ^both  the  actual  possession 
and  intention  of  keeping  possession  ceasing — the  property, 
which  is  founded  upon  such  possession  and  intention,  ought 
also  to  cease;  for,  naturally  speaking,  the  instant  a  man  ceases 
to  be,  he  ceases  to  have  any  dominion;  else  if  he  had  a  right 
to  dispose  of  his  acquisitions  one  moment  beyond  his  life,  he 
would  also  have  a  right  to  direct  their  disposal  for  a  million 
of  ages  after  him,  which  would  be  highly  absurd  and  incon- 

71  Edgerly  v.  Barker,  66  N.  H.   434,  31  Atl.  900,  28  L.  R.  A.  328. 


26  Trusts  for  Business  Purposes. 

venient.  All  property  must  therefore  cease  upon  death,  con- 
sidering man  as  absolute  individuals  and  unconnected  with  civil 
society. 

17 — Purpose  of  Rule. 

In  the  same  case  in  a  further  discussion  of  Perpetuities,  the 
court  said  that  whatever  may  have  been  the  origin  of  proprie- 
tary rights,  the  power  of  grantors  and  testators  to  control  the 
tenure,  possession,  use  and  alienation  of  property  after  it  ceases 
to  be  theirs  is  one  of  the  subjects  on  which  the  interests  of 
society  are  sufficiently  clear  and  strong  to  be  evidence  of  com- 
mon law.  By  tliat  law  an  owner's  imposition  of  unreasonable 
restrictions  upon  the  legal  and  equitable  titles  of  his  successors 
is  not  one  of  the  rights  of  which  property  consists;  and  the 
common-law  elements  of  ov.-nership  are  not  extinguished  by  a 
statute  conferring  or  regulating  the  power  of  alienation  by  deed 
or  will.  An  inability  to  postpone  the  vesting  of  an  estate  for 
an  unreasonable  time  is  one  of  many  instances  of  a  proprietor's 
loss  of  control  when  he  parts  with  his  title.  The  rule  against 
remoteness  is  not  a  detached  doctrine,  but  a  broader  principle 
applied  to  the  creation  of  remote  interests. 

The  policy  of  the  law,  where  a  man  dies  leaving  an  infant 
son,  restrains  alienation  until  such  infant  attains  twenty-one; 
and  as  such  infant  may  not  be  born  until  nine  or  ten  months 
after  the  death  of  its  father,  the  power  of  alienation  is,  of 
course,  suspended  during  that  period.  As  the  law  imposes 
such  suspension  of  the  power  of  alienation  on  the  infant,  so  it 
will  permit  such  suspense  by  the  owner  for  a  like  period,  for 
whether  it  arises  from  the  act  of  the  law  or  of  the  party,  the 
efifect  will  be  the  same  in  relation  to  the  interest  of  the  public 
in  the  property  which  is  what  is  consulted  in  the  doctrine  of 


Deed  of  Trust.  27 

perpetuities.'^'^ 

Estates  may  be  unalienable  for  lives  in  being  and  twenty-one 
years  merely  because  a  life  may  be  an  infant  or  an  en  ventre 
sa  mere.'^3     Tbe  established  length  of  time  during  which  the 
vesting  may  be  suspended  is  during  a  life  or  lives  in  being,  the 
period  of  gestation,  and  the  infancy  of  such  posthumous  child ; 
the  twenty-one  years  are  introduced  to  provide  for  the  minority 
of  a  child  born,  and  a  few  months  are  allov/ed  to  let  in  a 
posthumous  child.''^*    Taylor  v.  Biddall'^  is  one  of  the  first  cases 
reported  in  which  so  great  an  excess  as  twenty-one  years  after 
a  life  or  lives  in  being  was  allowed.    That,  however,  was  a,  case 
of  infancy,  and  it  was  on  account  of  that  infancy  that  the  vest- 
ing was  postponed.     This  case  was  allowed  by  and  was  the 
foundation  of,  the  decision  in  Stephens  v.   Stephens,''^  which 
was  also  a  case  of  infancy;  it  was  on  account  of  that  infancy 
that  the  vesting  of  the  estate  was  postponed.    These  decisions, 
therefore,  do  not  distinctly  or  necessarily  establish  the  position 
that  a  term  in  gross  for  twenty-one  years,  without  any  refer- 
ence to  infancy,  after  a  life  or  lives  in  esse,  will  be  good  by 
way  of  executory  devise;  but  there  is  nothing  in  them  neces- 
sarily to  confine  it  to  cases  of  infancy.     The  limit  is  a  life  or 
lives  in  being,  and  twenty-one  years  afterwards,  without  refer- 
ence to  the  infancy  of  any  person  whatever.     This  will  not  tie 
up  the  alienation  an  unreasonable  length  of  time.     In  the  case 
of  Cadell  v.  Palmer,"^'  it  was  held  that  although  a  period  of 
twenty-one  years  can  be  allowed  without  an  infant,  a  period  of 
nine  months  cannot  be  allowed  without  gestation. 

72  Fearne,     Remainders,     321,  Mass.  3-38,  5  Am.  Dec.  66,  Gray- 
Powell's  note.  Perpetuities,    Sec.    171-6. 

73Arden,  M.  R.  in  Thellusson  75  2  Mod.  289   (1677). 

V.   Woodford    (1799),   4   Ves.  Jr.  76  Cas.  t.  Talb.  232    (1736). 

227,  337.  77 10       Bing.       140-2-4-51       Id. 

74Hawley   v.    Northampton,    8  (1833),  1  Clark  &  F.  372. 


28  Trusts  for  Busineiss  Purposes. 

A  devise  to  trustees  for  the  support  of  the  testator's  children 
during  their  lives,  the  remainder  to  his  grandchildren  (born 
and  unborn)  when  the  youngest  is  forty  years  old,  is  an  un- 
reasonable suspension  of  the  grandchildren's  future  estate. 
The  vesting  of  their  remainder  can  not  be  postponed  beyond  the 
time  when  the  youngest  is  twenty-one.'^  So  the  general  rule 
against  perpetuity  forbids  the  creation  of  future  interest  in  real 
estate  which  will  not  necessarily  vest  within  a  life  or  lives 
in  being  at  the  creation  of  the  interest,  and  twenty-one  years 
thereafter;  and  the  purpose  of  the  rule  is  to  prevent  the  crea- 
tion of  interest  to  take  effect  upon  the  happening  of  remote 
contingencies.''^ 

1 8 — Rule  Applies  to  Trust  Estates  and  Personal  Property. 

The  rule  against  perpetuities  applies  as  well  to  trust  estates 
as  to  legal  estates  and  trusts  for  accumulations  are  confined 
strictly  within  the  rule.  Future  equitable  interests  are  subject 
to  the  same  rule  in  this  respect  as  similar  legal  interests. ^°  A 
trust  violating  the  rule  against  perpetuities  may  be  proceeded 
against  by  proper  authorities  and  estopped  from  further  and 
future  business.®^  In  the  case  of  Howe  v.  Morse  a  bill  was 
filed  against  the  Daggett  Building  Association.^^  a  trust,  to  de- 
clare it  void  as  violating  the  rule  against  perpetuity,  and  for  the 
further  reason  that  it  imposed  an  illegal  restraint  upon  aliena- 

78Marston  v.  Carter,  12  N.  H.  63  Am.  St.  230,   (Note)  11  L.  R. 

159-62;    Dennett    v.    Dennett,    40  A.  85. 

N.  H.  498-503,  43  N.  H.  499-501;  80  Howe  v.  Hodge,  152  111.  252, 

Wood  V.  Griffin,  46  N.  H.  230-4.  38  N.  E.  1083. 

79  Brown    v.    Brown,    247    111.  81  Green  v.  Pavey,  150  111.  513, 

528.    93    N.    E.    357;    Bigelow   v.  37  N.  E.  842. 

Cady,  171  111.  229,  48  N.  E.  974,  82  Howe    v.    Morse,    174    Mass. 

491,  55  N.  E.  213. 


I 


Deed  of  Trust.  29 

[HOWE    V.    MORSE.] 

tion.  The  court  in  passing  on  the  issues  raised  said  that  the 
plaintiffs  were  not  entitled  to  a  winding  up  of  the  trust,  and  a 
sale  of  the  property  for  the  trust  offended  neither  as  to  aliena- 
tion nor  as  to  perpetuity.  The  facts  and  the  law  handed  down 
by  the  court  are  in  substance  as  follows : 

"Is  this  trust  void  as  creating  a  perpetuity  or  imposing  an 
illegal  restrain  upon  alienation?"  the  court  asks,  and  then  says 
that  the  right  of  a  shareholder  to  convey  his  own  shares  or 
interests,  under  the  trust,  is  in  no  way  restricted.     It  was  con- 
tended that  illegality  was  found  in  the  circumstance  that  no 
sale  of  the  corpus  of  the  trust  and  no  termination  of  the  trust 
could  necessarily  occur  within  the  period  of  a  life  or  lives  in 
being  at  the  time  of  the  creation  of  the  trust  and  twenty-one 
years ;  that  the  provision  that  the  certificate  holders  should  not 
have  partition  of  the  land  and  could  compel  its  sale  only  by  a 
three-fourths  vote,  worked  an  illegal  restraint  upon  alienation. 
The  trustees  took  legal  title  to  allow  the  association,  through 
its  directors,  to  manage  the  land  and  to  enjoy  its  rent  and  in- 
come, and  to  sell  the  land  free  of  trusts,  at  the  will  of  the 
association,  with  a  further  provision  for  the  termination  of  the 
trust  by  vote  of  the  association  at  any  time  after  July  i,  1895. 
Leases  for  more  than  five  years  and  sales  could  be  made  only 
in  accordance  with  an  affirmative  vote  of  three-fourths  of  the 
shares,  and  a  like  vote  was  necessary  to  terminate  the  trust. 

19 — Equitable  Interest  is  in  Shareholders. 

The  shareholders  for  the  time  being  had  the  whole  equitable 
estate  in  the  corpus  of  the  trust,  and  could  at  all  times  sell  and 
transfer  their  equitable  estates  at  their  own  pleasure,  and  the 
trustee  held  the  legal  title  in  fee  in  trust  to  do  with  the  land 
whatever  might  be  required  by  the  owners  of  the  equitable 


30  Trusts  for  Business  Purposes.  " 

rHOWE    V.    MORSE.] 

estate ;  which  owners  had  full  capacity,  at  all  times  and  at  their 
own  option,  to  require  a  sale  of  the  land  discharged  of  the 
trust,  or  the  immediate  termination  of  the  trust  after  a  period 
of  five  years  and  a  few  days — the  owners  of  the  equitable  es- 
tate being  a  voluntary  association,  the  beneficial  interests  in 
which  were  represented  by  shares  and  the  association  acting  by 
vote  of  the  shareholders. 

That  the  directions  of  the  association  to  the  trustees  are  to 
be  given  by  three- fourths  votes,  rather  than  by  majority  votes, 
is  immaterial,  since  it  can  not  be  said  that  one  is  more  im- 
probable than  the  other.  Either  is  a  reasonable  way  of  de- 
claring the  will  of  the  association,  and  there  is  no  provision 
that  a  vote  to  sell  or  to  end  the  trust  must  be  passed  within  any 
stated  period,  or  at  all.  Such  a  trust  for  the  convenience  of 
an  unincorporated  association  in  renting  and  selling  land,  under 
which  the  land  is  held  for  no  other  purpose ;  where  the  income 
is  not  accumulated  but  is  distributed  as  it  accrues ;  where  the 
land  is  to  be  sold  free  of  trusts  at  the  will  of  the  association ; 
where  the  whole  equitable  interest  in  the  trust  is  at  every 
moment  vested  absolutely  in  those  who  at  that  moment  are 
shareholders  and  ne^'er  can  become  vested  in  any  other  persons 
save  by  act  of  the  absolute  owners  or  by  operation  of  law  upon 
their  property  and  not  by  force  of  any  limitation  contained  in 
the  deed  of  trust — the  equitable  interests  so  vested  being  also 
constantly  vendible  by  their  several  owners  without  let  or 
hindrance  as  well  as  subject  to  their  debts  and  passing  like 
other  property  upon  death  by  virtue  not  of  the  deed  of  trust 
but  of  the  general  laws  governing  the  disposition  of  the  prop- 
erty of  decedents — withdraws  no  property  from  commerce  and 
is  not  within  the  reason  or  the  terms  of  what  is  called  the  "rule 
against  perpetuities."  The  trust  in  this  case  involves  no  future 
limitations,  no  restraint  upon  alienation,  and  no  accumulation 


Deed  of  Trust.  31 

IHOWE  V.  MOBSE.] 

either  of  income  or  of  principal.  The  provisions  by  which  the 
trust  fund  may  be  at  some  time  held  for  the  benefit  of  persons 
not  shareholders  at  its  inception,  and  who  may  become  such  at 
a  period  more  remote  than  that  allowed  by  the  rule,  are  not 
future  limitations  made  by  the  trust  deed  in  the  sense  in  which 
the  word  "limitation"  is  used  in  speaking  of  the  operation  of 
the  rule.  If  there  shall  ever  be  a  shareholder  other  than  those 
in  which  the  whole  equitable  estate  was  absolutely  vested  at 
the  inception  of  the  trust,  that  shareholder  will  not  take  his 
interest  by  virtue  of  a  limitation  in  the  trust  deed,  but  because 
of  his  succession,  by  virtue  of  the  general  principles  of  law,  to 
the  property  of  the  original  shareholder.  The  new  shareholder, 
with  reference  to  the  rule,  is  in  the  same  situation  as  a  person 
who,  after  the  expiration  of  all  lives  which  were  in  being  when 
a  fee  or  an  estate  tail  was  created,  and  of  a  further  period  of 
21  years,  takes  the  fee  by  the  operation  of  the  law  which  makes 
property  vendible  by,  or  descendible  from,  the  owner,  and  not 
by  virtue  of  a  limitation  in  the  instrument  which  created  the 
fee. 

The  entire  ownership  is  never  for  a  moment  uncertain  or 
unvested,  and  at  every  moment  each  owner  can  freely  dispose 
of  his  property,  and  at  each  moment  it  can  be  transferred  to  his 
creditor  by  the  ordinary  processes  of  the  law,  and  at  each  mo- 
ment the  trust  can  be  terminated  at  the  will  of  the  owners  of 
the  equitable  interest.  The  case  is  not  like  any  of  those  relied 
on  by  the  plaintiffs.  The  statement  that  "it  is  impossible  to  take 
in  succession  forever  without  a  capacity,  and  a  capacity  to  take  in 
succession  cannot  be  without  incorporation,"  quoted  from 
the  case  of  Sutton's  Hospital,^^  is  there  made  of  a  corporation 
administering  a  public  charity,  it  being  contended  that  the  in- 
corporation was  void  because  the  foundation  was  not  made  be- 

83  10  Coke,  26b. 


32  Trusts  for  Business  Purposes. 

IHOWE    V.    MORSE.] 

fore  the  grant  of  the  letters  patent  incorporating  the  hospital, 
and  the  statement  does  not  import  that  perpetual  succession  can- 
not exist  save  in  cases  of  holding  by  corporations.  We  see 
no  proper  application  to  the  present  case  of  the  statement 
quoted.  Carne  v.  Long,^*  and  Carrier  v.  Price,^^  were  gifts 
to  societies  whose  members  took  no  personal  beneficial  interest 
in  the  property  which  had  to  be  kept  for  the  purposes  of  the 
society  and  could  not  be  disposed  of  by  the  members  for  the 
time  being.  These  cases,  there  being  no  public  cliarity,  were 
simply  private  trusts,  and  the  gifts  were  bad  because  the  mem- 
bers of  the  society  for  the  time  being  did  not  have  power  to 
alienate  the  estate.'^ 

It  is  said  that  in  the  case  of  voluntary  societies  for  whose  use 
land  is,  in  efl;ect,  held  in  perpetuity,  as  in  the  case  of  the  inns 
of  court,  whenever  the  number  of  benchers  to  whom  the  fee 
of  the  land  is  conveyed  as  joint  tenants  is  considerably  re- 
duced, the  surv'ivors  cause  the  land  to  be  conveyed  to  all  the 
then  hving  benchers.  But  the  benchers  are  not  expected  to 
use  these  lands  for  their  personal  benefit.  The  plain  purpose 
is  to  keep  the  lands  forever  for  the  use  of  the  voluntary  asso- 
ciation as  a  society  charged  with  certain  duties  and  enjoying 
certain  rights,  connected  in  a  general  way  with  the  administra- 
tion of  the  law,  and  which  is  inconsistent  with  any  personal 
interest  in,  or  control  over,  the  land  on  the  part  of  the  in- 
dividual benchers.  Such  cases  are  therefore  like  those  already 
examined.  So,  too,  the  present  case  is  clearly  distinguishable 
from  Winsor  v.  Mills.^' 

20 — Beneficiaries  not  Entitled  to  Partition. 

The  provision  in  the  present  trust,  tliat  the  shareholders  are 

84  2  De  Gex,  F.  &  J.  75,  In  re  86  Gray,  Perp.  409,  note  2 
Button,  4  Exch.  Div.  54.                     Mars.  Perp.  300. 

85  (1891)    3  Ch.  159.  87  157  Mass.  362,  32  N.  E.  352. 


De;ed  or  Trust.  33 

FHOWE    V.    MORSE.l 

not  to  have  any  interest  or  title  in  the  trust  property  itself, 
and  no  right  to  call  for  partition,  and  tliat  the  shares  shall  be 
personal  property,  is  not  a  restraint  upon  alienation,  since  the 
alienation  of  the  legal  and  the  equitable  ownerships  is  provided 
for.  It  does  not  appear,  and  cannot  be  assumed,  that  the  per- 
sons who  organized  the  association  and  became  its  shareholders 
had  title  to  the  land  held  by  the  trustees.  Their  whole  interest 
comes  through  the  shares  which  are  vendible  without  restraint. 
In  Winsor  v.  Mills,  supra,  Philbrick,  who  held  the  title,  owned 
two  undivided  thirds  of  the  land  and  held  the  remaining  un- 
divided third  in  trust  for  Mills,  under  an  explicit  agreement 
that  no  sale  or  conveyance  of  the  land,  or  of  any  part  thereof, 
or  of  any  interest  therein,  should  be  made  by  Philbrick,  his  heirs 
or  assigns,  except  upon  the  written  consent  of  Mills,  his  heirs 
or  assigns ;  and  there  was  also  a  provision  by  which  a  part  of 
the  land  might  be  purchased  by  Mills,  or  his  heirs  or  assigns, 
at  a  special  price,  at  any  time  before  the  land  should  be  other- 
wise sold  or  disposed  of.  These  were  restraints  upon  aliena- 
tion, and  were  held  void,  because  they  might  continue  too  long. 
The  purpose  of  the  trust  was  to  prevent  the  alienation  of  the 
land,  and  to  keep  it  out  of  commerce.  Neither  of  the  owners 
could  convey  his  own  share  in  the  property,  and  the  land  was 
intentionally  tied  up. 

The  court  is  of  opinion  that  the  ruling  at  the  hearing  was 
correct ;  tliat  the  trusts  set  forth  were  not  void  as  creating  a 
perpetuity  or  imposing  an  illegal  restraint  upon  alienation ;  and 
that  the  plaintiffs  are  not  entitled  to  a  winding  up  of  the  trust 
and  a  sale  of  the  property,  as  prayed.  They  are  entitled,  upon 
the  findings  of  the  report,  to  an  account,  and  also  to  receive 
regular  accounts  in  the  future,  and  a  decree  accordingly  should 
be  entered. 


CHAPTER  II. 
VALIDITY. 

Rights  Distinguished  From  Law. 

21 — In  General. 

The  only  limitation  placed  on  the  trust  in  its  development  is 
that  its  purpose  shall  be  not  illegal  or  against  the  public  policy 
of  the  state.  In  contemplating  the  trust  as  a  business  organiza- 
tion one  of  the  first  questions  to  present  itself  is,  under  what 
law  is  it  organized  and  from  what  source  does  it  receive  its 
privileges  and  powers.  The  corporation,  being  a  creature  of 
the  law,  we  may  turn  to  the  act  under  which  it  is  organized  and 
there  find  all  the  privileges  set  forth  which  it  may  exercise  and 
enjoy.  With  the  trust  we  are  confronted  with  an  entirely  dif- 
ferent situation,  for  it  is  not  organized  under  any  particular 
law,  but  comes  into  being  from  a  right — a  right  which  a  free 
people  may  exercise  in  contracting,  and  alienating  property. 
The  trust  as  used  in  modern  business  has  been  confused  with 
the  common  law,  it  in  no  way  depends  for  its  existence  on  the 
common  law,  only  in  so  far  as  the  common  law  protects  com- 
mon law  rights. 

As  a  medium  for  business,  the  trust  has  been  used  a  great 
deal  in  England  and  Germany  and  is  being  developed  and  em- 
ployed more  and  more  each  day  in  the  different  states  here. 
With  this  expansion  of  the  trust  the  question  of  its  legality  is 
raised  constantlv  and  will  have  to  be  answered  to  the  satisfac- 
tion  of  business  and  manufacturing  enterprise  before  it  can 

(34) 


Validity.  35 

come  into  universal  use.  From  earliest  times  the  English 
courts  have  recognized  the  rights  of  individuals  to  form  joint 
stock  companies  and  make  contracts  independent  of  statute  and 
the  common  law;  the  people  exercised  this  right  and  the  com- 
mon law  protected  them  in  that  right.^^  The  courts  in  this 
country  refer  often  to  common  law  rights — a  phrase  which 
distinguishes  from  the  common  law.  In  reference  to  an  insur- 
ance case  in  Ohio,^^  the  court  uses  this  language :  "There  was 
no  class  of  business,  the  transaction  of  which,  as  a  matter  of 
private  right,  was  better  recognized  at  common  law  than  that 
of  making  contracts  of  insurance  upon  the  lives  of  individuals." 
Different  courts  in  our  country  have  said  repeatedly  that  any 
right,  interest  or  thing  which  may  be  the  subject  of  property 
may  be  conveyed  in  trust ;  in  fact  every  kind  of  a  vested  right 
which  the  law  recognizes  as  valuable  may  be  transferred  in 
trust.^*'  The  only  limitation  which  has  been  placed  on  the 
trust,  as  stated  above,  is  that  its  purpose  shall  be  not  illegal  or 
against  the  public  policy  of  the  state. 

In  some  form  or  other,  the  trust  has  been  before  the  courts 
in  practically  every  state  in  the  union,  and  in  most  cases  the 
particular  questions  have  been  passed  on  without  the  origin  of 
the  trust  being  considered  or  its  existence  as  a  matter  of  right 
being  debated. ^^    Following  our  colonial  days,  we  not  only  rec- 


88  In  re  Mexican  and  S.  A.  Co.,  Lamb,  11  Cal.  App.  717,  106  Pac. 
27  Beav.  474;  6  L.  R.  A.  (N.  S.)  254;  Sears  Trust  Estates,  2nd 
665.  Edition  370;   Thompson-Business 

89  State  V.  Ackerman,  51  Ohio  Trusts  16. 

St.  163,  37  N.  E.  828,  24  L.  R.  A.  91  Hart    v.     Seymour     (1893), 

298.  147   III.   598,   35   N.   E.    246,   7    A. 

90  Burke  v.  Burke,  259  111.  L.  R.  613;  Mallory  v.  Russell 
262,  102  N.  E.  293;  Venner  v.  (1887),  71  Iowa  63,  6  Am.  Rep. 
Chicago  City  Ryl  Co.,  258  111.  776,  32  N.  W.  102;  Hoadley  v. 
523,   101  N.  E.   949;    Thomas  v.  Essex  County   (1870),  105  Mass. 


36  Trusts  for  Business  Purposes. 

ognized  and  followed  the  English  rule  as  to  rights  and  priv- 
ileges, but  also  specifically  set  forth  in  the  Declaration  of 
Independence  "that  all  men  are  created  equal ;  that  they  are 
endowed  by  their  Creator  with  certain  unalienable  rights;  that 
among  these  are  life,  liberty,  and  the  pursuit  of  happiness;  that 
to  secure  these  rights  governments  are  instituted  among  men." 
Here  we  have  an  expression  of  rights  which  governments  are 
organized  to  uphold;  the  law  being  simply  the  means  of  main- 
taining and  protecting  these  rights. 

Section  i  of  article  2  of  the  Constitution  of  Illinois  says : 
"That  all  men  are  by  nature  free  and  independent,  and  have 
certain  inherent  and  inalienable  rights.  Among  these  are  life, 
liberty,  and  the  pursuit  of  happiness."  Section  2  of  article  2 
of  the  Constitution  is  as  follows:  "No  person  shall  be  deprived 
of  life,  liberty,  or  property  without  due  process  of  law."  The 
vSupreme  Court  of  Illinois,  in  the  case  of  Bessette  v.  People,^** 
said  that  the  constitutional  guaranties  secured  by  these  pro- 
visions include  the  right  of  the  citizen  to  follow  his  individual 
preference  in  the  choice  of  an  occupation. ^^  The  general  prop- 
osition that  the  enjoyment  by  the  citizen  of  the  privilege  of 
pursuing  an  ordinary  calling  or  trade  upon  terms  of  equality 
with  all  others  in  similar  circumstances  is  a  general  part  of 
his  rights  of  liberty  and  property  which  has  been  assented  to  by 

519;   Frost  v.  Thompson    (1914),  204    Pa.    432,    54    Atl.    316;    Con- 

219    Mass.   360,   106  N.   E.   1009;  nelly  v.    Lyons    (1891),    82   Tex. 

Cross  V.  Jackson  (1843),  5  Hill.  664,  21  Am.  St.  Rep.  935,  18  S. 
478;   King  v.  Townshend   (1894),  '    W.   799. 

141    N.    Y.    358,    36    N.    E.    513;  92  193    111.    334,    62    N.    E.    215. 

Merchants    Nat.    Bank   v.   Wehr-  93  Black,  Const.   Law,   pp.  404, 

mann  (1903),  69  Ohio  St.  160,  68  411;   Ruhstrat  v.  People,  185  111. 

N.  E.  1004;  In  Re  Pittsburg  133;  49  L.  R.  A.  181,  57  N.  E.  41. 
Wagon    Works'    Estate     (1903), 


I 


Validity.  37 

the  Supreme  Court  of  the  United  States.^*  The  court,  in 
Bessette  v.  People,  supra,  further  stated  that  the  right  to  fol- 
low any  of  the  common  occupations  of  life  is  an  inalienable 
right.  It  was  formulated  as  such  under  the  phrase  'pursuit  of 
happiness'  in  the  Declaration  of  Independence  which  com- 
menced with  the  fundamental  proposition  that  'all  men  are 
created  equal ;  that  they  are  endowed  by  their  Creator  with 
certain  inalienable  rights ;  and  among  these  are  life,  liberty,  and 
the  pursuit  of  happiness.'  This  right  is  a  large  ingredient  in 
the  civil  liberty  of  the  citizen.  It  was  also  said  in  the  case  of 
Allgeyer  v.  Louisiana,  supra,  that  the  liberty  of  pursuit — the 
right  to  follow  any  of  the  ordinary  callings  of  life— is  one  of 
the  privileges  of  a  citizen  of  the  United  States.  In  Braceville 
Coal  Co.  V.  People,^^  the  court  said  that  liberty,  as  tlrnt  term 
is  used  in  the  Constitution,  means  not  only  freedom  of  the 
citizen  from  servitude  and  restraint,  but  is  deemed  to  embrace 
the  right  of  every  man  to  be  free  in  the  use  of  his  powers  and 
faculties,  and  to  adopt  and  pursue  such  avocation  or  calling  as 
he  may  choose,  subject  only  to  the  restraints  necessary  to  secure 
the  common  welfare.  In  discussiong  this  question  of  rights 
further,  the  Supreme  Court  of  Illinois,  in  another  case,^^  says 
that  the  terms  'life,'  'liberty,'  and  'property'  are  representative 
terms,  and  intended  to  cover  every  right  to  which  a  member  of 
the  body  politic  is  entitled  under  the  law.  These  terms  include 
the  right  of  self-defense,  freedom  of  speech,  religious  and  polit- 
ical freedom,  exemption  from  arbitrary  arrests,  the  right  freely 
to  buy  and  sell  as  others  may.     Indeed,  they  may  embrace  all 

94  Powell  V.  Pennsylvania,  127  95  147  111.  66,  22  L.  R.  A.  340, 

U.  S.   678,  32  L.  ed.  253,  8  Sup.  35  N.  E.  62. 

Ct.  Rep.  992;  Allgeyer  v.  Louisi-  96  Gillespie  v.   People,   188    111. 

ana,  165  U.  S.  578,  41  L.  ed.  832,  176,  SO  Am.  St.  176,  52  L.  R.  A. 

17   Sup.  Ct.  Rep.  427.  283. 


38  ■      Trusts  f'or  Busini:ss  Purpose;s. 

our  liberties,  personal,  civil,  and  political,  including  the  rights 
to  labor,  to  contract,  to  terminate  contracts,  and  to  acquire 
property.  None  of  these  liberties  and  rights  can  be  taken 
away,  except  by  due  process  of  law.^'  The  rights  of  life,  lib- 
erty, and  property  embrace  whatever  is  necessary  to  secure  and 
effectuate  the  enjoyment  of  those  rights.  The  rights  of  liberty 
and  of  property  include  the  right  to  acquire  property  by  labor 
and  by  contract.^^  In  this  last  sentence  the  court  expressly 
states  that  an  inalienable  right  is  the  right  to  contract,  and  in 
its  first  and  last  analysis  the  trust  is  nothing  more  or  less  than 
a  contract.  It  is  the  alienation  of  property  with  or  without 
consideration ;  it  is  created  by  the  mutual  acts  of  the  parties. 

In  a  case  before  the  Federal  court,^^  the  question  as  to  the 
right  of  a  trust  to  carry  on  a  manufacturing  business  was  not 
involved,  but  the  court  clearly  decided  that  the  trust  derived 
none  of  its  right,  qualities  or  benefits  from  any  statute.  From 
this  it  might  be  argued  that  the  trust  is  a  creature  of  the  com- 
mon law.  In  a  Llassachusetts  case,^*'^  the  question  of  the  rights 
and  privileges  of  the  trust  was  put  in  issue  in  relation  to  taxa- 
tion on  what  was  termed  an  association ;  the  court  said  that  the 
association  was  not  a  corporation ;  that  it  was  merely  a  partner- 
ship with  all  the  incidents  and  responsibiHties  of  a  partnership; 
that  it  enjoyed  no  franchise  confirmed  upon  it  by  legislature: 
that  it  did  not  ask  for  or  enjoy  any  corporate  or  special  priv- 
ilege; that  it  had  constituted  its  partnership  under  its  common 
law  rights  and  such  legal  agreements  as  it  chose  to  make.  Here 
the  court  expressly  recognized  the  common  law  right  to  contract 

97  2  Story,  Const.  5th  ed.  Sec.  Fed.  809,  170  C.  C.  A.  609,  7  A. 
1950.  L.    R.    608. 

98  Ritchie    V.    People,    155    111.  lOO  Gleason     v.     McKay,     134 
98,  29  L.  R.  A.  79,  40  N.  E.  454.  Mass.  419. 

99Malley     v.     Bowditch,     259 


Validity.  39 

as  distinguished  from  the  common  law.  In  a  New  York  case,^ 
where  the  question  of  right  was  involved,  it  was  said  that  the 
relation  which  parties  assume  in  creating  associations  is  wholly 
the  product  of  their  mutual  agreements  and  depends  in  no  re- 
spect upon  the  grant  or  authority  of  the  state;  it  is  founded 
on  the  rights  of  citizens  individually  to  join  their  capital  and 
enterprise  by  contract.  This  doctrine  is  in  keeping  with  an 
Indiana  case,^  which  expresses  the  view  that  the  trust  is  a 
citizen  and  entitled  to  all  the  rights  and  privileges  of  an  indi- 
vidual. In  the  case  of  Spotswood  v.  Morris,^  which  involves 
a  trust  organized  in  Idaho  for  the  purpose  of  dealing  in  land, 
the  court  not  only  adopts  the  view  expressed  in  the  Winchester 
V.  Coleman  case  just  cited,  but  also  emphasizes  the  common 
Jaw  right  to  contract.  Trusts  for  business  purposes  are  quite 
commonly  referred  to  as  common  law  companies,  and  they  are 
generally  referred  to  as  organized  under  the  common  law. 
From  the  foregoing  decisions  it  would  seem  that  the  phrase 
"common  law  company"  as  referring  to  a  trust  is  a  misnomer, 
for  they  are  created  in  this  country,  as  in  England,  under  the 
right  of  citizens  to  contract.  A  case  before  the  Appellate  court 
of  Illinois,*  in  which  a  trust  was  involved  in  litigation  over  the 
sale  of  some  of  its  securities,  is  of  interest  for  the  reason  that 
the  attorneys  on  both  sides  as  well  as  the  court,  followed  the 
theory  that  the  trust  was  a  creature  of  the  common  law.  The 
facts  in  the  case  as  taken  from  the  decision  are  in  substance  as 
follows : 


1  Winchester   v.   Coleman,    133  146. 

N.   Y.    279,   16   L.  R.   A.   183,    31  3  12    Idaho   360,    85    Pac.    1094, 

N.  E.  96.  6  L.  R.  A.   (N.  S.)   665. 

2  Farmers  Loan  &  Trust  Co.  v.  4  Kinross   v.   Cooper,   App,  Ct 
Chicago    &   A.   Ry.    Co.,    27    Fed.  111.,  Feb.  1922. 


40  Trusts  for  Busineiss  Purposes. 

22 — Sale  of  Beneficial  Interests — In  Reference  to  Security  Act. 

John  W.  Kinross,  John  J.  Cooper,  Sam  W.  Cassaway  and 
WilHam  J.  Peck,  who  claimed  to  be  trustees  of  the  American 
Manufacturing  Company,  of  Peoria,  which  was  alleged  to  be  a 
joint  stock  or  common  law  company,  took  judgment  by  confes- 
sion in  the  Circuit  Court  of  Peoria  County  against  one  W.  D. 
Cooper,  for  $1142.35,  upon  two  promissory  notes  for  $500.00 
each;  Cooper  asked  to  have  the  judgment  vacated  with  leave 
to  plead,  which  was  allowed.  He  then  filed  the  general  issue 
and  six  special  pleas,  all  of  which  were  subsequently  withdrawn 
except  the  sixth  and  seventh  special  pleas.  A  general  and  spe- 
cial demurrer  was  filed  by  the  trust  through  its  trustees  to  the 
special  pleas ;  on  a  hearing  the  demurrer  was  overruled.  The 
trustees  elected  to  stand  by  the  demurrer,  whereupon  judgment 
was  entered  in  favor  of  W.  D.  Cooper,  and  from  that  judg- 
ment the  trustees'  appeal  was  prosecuted. 

The  sixth  and  seventh  special  pleas  filed  by  W.  D.  Cooper 
(appellee)  set  vip  in  substance  that  the  American  Manufactur- 
ing Company  and  appellee  entered  into  an  agreement  whereby 
appellee  was  to  purchase  ten  shares  of  the  capital  stock  of  the 
American  Manufacturing  Company  at  the  par  value  of  $100.00 
each,  and  the  notes  were  made,  executed  and  delivered  in  con- 
sideration therefor ;  that  the  American  Manufacturing  Com- 
pany was  not  a  corporation,  either  domestic  or  foreign,  but 
was  an  unincorporated  association  holding  itself  out  as  an  or- 
ganization under  the  common  law  in  force  in  the  State  of  Illi- 
nois; that  it  had  not  qualified  its  stock,  and  participation  cer- 
tificates for  sale  in  Illinois  pursuant  to  the  terms  and  provisions 
of  the  Illinois  securities  law  of  1919,  and  by  reason  thereof 
the  sale  in  question  was  void  and  the  consideration  for  which 
the  notes  were  executed  wholly  failed.    Cooper  further  sets  out 


Validity.  41 

[KINROSS    V.    COOPER.] 

as  his  defense  to  the  notes  that  the  Trust  was  a  common  law 
company  and  that  it  failed  to  comply  with  the  Security  Act. 
The  trust,  by  its  demurrer,  admits  tliat  it  is  a  common  law  com- 
pany; this,  in  effect,  eliminates  from  the  controversy  the  trust 
question,  and  leaves  the  court  to  determine  whether  a  common 
law  company,  in  the  sale  of  its  securities,  is  subject  to  the  Se- 
curity Act.  Had  the  trust  denied  that  it  was  a  common  law 
company  and  set  forth  that  it  was  organized  by  the  trustor 
under  his  right  to  contract,  an  entirely  different  question  would 
have  been  presented  to  the  court  than  the  one  to  determine  the 
right  of  a  common  law  company  to  sell  its  shares  without  com- 
plying with  the  Security  Act.  The  court,  in  passing  on  the 
question,  said :  "The  sole  question  upon  this  appeal  is  whether 
or  not  the  Illinois  Securities  Law  includes  within  its  scope  a 
declaration  of  trust  or  common  law  company." 

23 — Illinois    Security    Act    in    Reference    to    Common    Law 
Companies. 

Ttie  Illinois  Securities  Act,  Kurd's  Statutes  of  1919.  page 
2672,  is  entitled  "An  Act  relating  to  the  sale  or  other  dis- 
position of  securities  and  providing  penalties  for  the  violation 
thereof."  Section  2  defines  securities  under  the  act  to  include 
stocks,  bonds,  debentures,  notes,  participating  certificates,  cer- 
tificates of  shares  or  interest,  pre-organization  certificates,  sub- 
scription certificates  evidencing  shares  in  trust  estates  or 
associations,  and  profit  sharing  certificates.  In  the  same  section 
the  word  'issuer'  as  used  in  the  Act  is  defined  to  include  every 
person  and  every  company,  trust,  partnership  or  association  in- 
corporated or  unincorporated  heretofore  or  hereafter  formed 
for  any  lawful  purpose  and  organized  under  the  laws  of  this 
state  or  any  other  foreign  state  or  country  which  shall  issue 


42  Trusts  for  Busine;ss  Purposes. 

[KINROSS    V.    COOPER.] 

any  security  sold  or  offered  for  sale  to  any  person  or  persons  in 
this  state.  Section  3  divides  securities  into  four  classes :  A, 
B,  C,  and  D.  It  seems  to  be  conceded  that  the  stock  issued  in 
this  case  comes  under  Class  D.  It  is  admitted  that  prior  to 
the  sale  set  out  in  the  pleas,  the  provisions  of  sections  9  and 
TO  were  not  complied  with  relative  to  statements  and  documents 
to  be  filed  with  the  Secretary  of  State.  Section  37  provides 
that  every  sale  of  stock  in  violation  of  the  provisions  of  the  act 
and  where  the  act  is  not  complied  with  shall  be  void. 

The  court  in  commenting  on  the  theory  advanced  by  the 
trust  said :  "The  contention  of  appellants  is  that  a  joint  stock 
company  or  common  law  company  does  not  come  within  the 
provisions  of  Section  2 ;  that  the  term  'laws  of  this  state/  as 
used  in  Section  2,  does  not  include  the  common  law ;  that  in 
order  to  bring  the  issuer  of  stock  within  the  act,  two  things  are 
required,  first:  that  the  issuer  must  be  formed  for  a  lawful 
purpose,  and  second :  that  it  must  be  organized  under  the 
laws  of  this  state  or  a  foreign  state  or  country,  and  if  it  is  not 
so  organized  such  issuer  does  not  come  within  the  terms  of 
the  act.  It  is  also  urged  that  a  common  law  company  is  not 
organized  under  the  laws  of  this  state  or  any  foreign  state  or 
country  but  is  based  upon  a  written  instrument  or  contract  be- 
tween the  shareholders  and  the  trustees,  and  the  contract  cre- 
ates a  trust  estate ;  that  the  contract  or  deed  of  trust  in  this  case 
was  recorded  in  the  recorder's  office  of  Peoria  County,  and, 
therefore,  became  a  public  document  whereby  the  public  is 
charged  with  notice  of  its  contents." 

The  trustees  argued  that  they  were  not  organized  under  the 
laws  of  Illinois  or  any  foreign  state  or  country,  but  that  their 
trust  was  based  upon  a  written  contract  between  the  share- 
holders and  the  trustees ;  the  trouble  with  that  argument  is 
that  in  their  pleadings  they  admit  they  are  organized  under  the 


Validity.  43 

[KINROSS    V.    COOPER.] 

common  law.  The  court  in  discussing  this  point  says:  'In 
support  of  this  position  appellant  cites  the  case  of  Elliott  v. 
Freeman^  which  involved  a  federal  corporation  tax  act  which 
by  its  terms  was  to  include  'all  corporations  now  or  hereafter 
organized  under  the  laws  of  the  United  States  or  of  any  state 
or  territory  in  the  United  States,  or  under  the  act  of  Congress 
applicable  to  Alaska  or  the  District  of  Columbia.'  It  was  there 
held  by  the  Supreme  Court  of  the  United  States  that  the  word 
'laws'  means  statutes,  and  that  a  common  law  company  was  not 
within  the  terms  of  the  act.  It  is  insisted  that  the  word  'laws' 
in  the  Illinois  Act  is  used  with  the  limitation  placed  upon  it  by 
the  Supreme  Court  of  the  United  States,  and  that  to  give  it  any 
other  meaning  would  be  a  violation  of  Section  lo.  Article  i,  of 
the  Federal  Constitution,  and  Article  2,  Section  14  of  the  Con- 
stitution of  Illinois,  which  prohibit  laws  impairing  the  obliga- 
tion of  contract.  There  is  no  question  in  this  case  as  to  the  con- 
stitutionality of  the  Illinois  securities  law.  That  question  was 
not  raised  in  the  trial  court  and  is  not  raised  in  this  court. 
Since  the  briefs  and  arguments  have  been  filed  in  this  case  the 
Supreme  Court,  in  the  case  of  Stewart  v.  Brady ,6  has  held  that 
this  law  is  constitutional.  The  only  question  on  this  appeal, 
therefore,  is  whether  the  Illinois  Securities  Act  includes  com- 
mon law  companies. 

24 — Common  Lazv  as  Effected  by  Statute. 

The  common  law  until  repealed  by  legislative  enactment  is 
in  full  force  and  effect  in  this  state.  (Kurd's  Statute  19 19, 
Chapter  28,  Section  i.  Page  680.)  The  laws  of  this  state  in- 
chide  the  constitution,  statutes  and  rules  applied  in  the  admin- 

5  220  U.  S.  178,  55  L.  ed.  424,  6  Stewart    v.    Brady,    300    111. 

31  Sup.  Ct.  Rep.  360.  425,  133  N.  E.  310. 


44  Trusts  for  Business  Purposes. 

TKINBOSS    V.    COOPER.] 

istration  of  justice  as  construed  and  applied  by  the  courts  of 
last  resort  in  this  state.  To  this  may  be  added  the  common 
law.  In  Hunt  v.  Chicago  &  Dummy  Ry.  Co.'  the  question 
raised  was  the  construction  of  the  lUinois  constitution  as  to 
the  duties  of  the  attorney  general.  The  constitution  authorizes 
the  attorney  general  to  pcrfcnn  such  duties  as  may  be  pre- 
scribed by  law  and  defendants  urged  that  the  words  'prescribed 
by  law'  meant  that  the  attorney  general  sliall  perform  such 
duties  as  shall  be  prescribed  by  any  law,  statutory  or  otherwise, 
and  on  Page  289  the  court  says :  'The  common  law  of  Eng- 
land, having  been  expressly  adopted  in  this  state,  is  as  much 
a  part  of  our  law — wherever  it  is  applicable  and  so  far  as  it 
has  not  been  changed  by  statute — ^as  are  the  statutes  them- 
selves ;  and  a  duty  required  of  the  attorney  general  by  the  rules 
of  the  common  law  is  as  much  a  duty  required  of  him  by  law 
as  though  it  were  imposed  by  the  expressed  mandate  of  the 
statute.'  If  the  common  law  is  a  part  of  the  law  of  this  state, 
then  a  corporation  organized  under  the  common  law  would 
come  within  the  provisions  of  Section  2,  notwithstanding  the 
decision  in  the  Elliott  case  to  the  contrary.  This  is  a  question 
of  construction  under  the  laws  of  the  state  of  Illinois,  and  it 
is  not  a  question  of  construction  under  the  laws  of  the  United 
States.  Section  2  includes  every  person,  company,  trust,  part- 
nership or  association  incorporated  or  unincorporated  hereto- 
fore or  hereafter  formed  and  organized  under  the  laws  of  this 
state.  The  legislature  intended  under  this  section  to  include 
all  organizations  either  at  common  law  or  under  a  statute. 

Cooper  contended  that  the  American  Manufacturing  Com- 
pany exercised  practically  all  of  the  functions  of  a  corporation 
but  that  under  the  laws  of  this  state  it  was  in  fact  a  partnership 

7  Hunt   V.   Chicago   &    Dummy    Ry.  Co.,  20  111.  App.  282. 


Validity.  45 

[KINROSS    V.    COOPER.] 

and  not  a  common  law  company.  In  support  of  this  conten- 
tion, the  case  of  Pilsen  Brewing  Co.  v.  Wallace,^  was  cited 
where  it  was  held  that  a  company  which  is  not  a  corporate 
body  is  a  partnership  composed  of  the  officers  and  subscribers 
to  the  articles  of  the  association.  Many  other  cases  were  cited 
in  support  of  this  position.  The  court,  in  a  summary  of  its 
decision,  said:  "If  the  American  Manufacturing  Company 
were  a  partnership,  it  would  be  required  to  comply  with  the 
provisions  of  the  law  the  same  as  an  individual  or  a  corpora- 
tion. It  made  no  difference,  so  far  as  the  decision  of  this 
question  was  concerned,  whether  the  appellant  company  was  a 
common  law  company  or  was  a  partnership,  for  the  reason  that 
in  either  case  it  came  within  the  provisions  of  the  statute. 
There  was  no  attempt  to  comply  with  the  law.  The  sale 
of  the  shares  was  void  and  for  that  reason  the  demurrer  was 
declared  properly  overruled  to  the  sixth  and  seventh  pleas." 

There  is  no  question  but  that  the  common  law  is  a  part  of 
the  law  of  Illinois ;  luit  this  trust  was  not  organized  under  the 
common  law,  for  there  is  no  part  of  the  common  law  applicable 
to  trusts,  except  in  that  the  common  law  upholds  a  common 
law  right.  It  was  erroneously  assumed  by  both  sides  of  the 
case  in  their  pleadings  that  the  American  Manufacturing  Com- 
pany was  a  common  law  company.  The  argument  of  the 
trustees  was  that  they  existed  as  a  matter  of  right,  if  their 
pleadings  had  been  such  that  the  court  could  have  passed  on 
that  question,  undoubtedly  it  would  have  followed  the  cases 
previously  cited  wherein  a  right  was  distinguished  from  the 
law.  Trusts  are  organized  as  a  matter  of  right;  and  the  law  is 
simply  a  means  of  protecting  the  interests  under  that  right,  or 

8  Pilsen    Brewing   Co.    v.   Wal-      8  A.  L.  R.  579. 
lace,   291   111.   59,  125  N.  E.   714, 


46  Trusts  i^or  Busine;ss  Purposes. 

as  said  by  Justice  Field,  in  the  slaughter-house  cases,^  "Rights 
are  the  gift  of  the  creator  which  the  law  does  not  confer,  but 
only  recognizes."^® 

The  Trust  as  an  Entity. 

25 — In  General. 

In  different  jurisdictions  and  different  courts,  trusts  have 
been  called  'associations,'  'unincorporated  companies,'  and  'part- 
nerships.' In  all  probability  this  confusion  is  caused  mainly  by 
loosely  drawn  instruments  wherein  the  liability  of  the  trustees 
and  beneficiaries  is  not  clearly  defined  or  properly  limited,  or 
by  failure  of  the  court  to  recognize  the  trust  as  an  entity.  In 
a  Texas  case^^  where  the  trustees  were  not  under  the  super- 
vision of  the  beneficiaries,  but  were  in  exclusive  control  of  the 
property,  the  court  in  passing  on  the  trust  as  an  entity  said: 
"The  first  question  arising  on  the  appeal  is  whether  the  agree- 
ment entered  into  between  the  parties  to  the  suit,  and  under 
the  terms  on  which  they  organized  and  were  conducting  the 
business  in  which  they  were  engaged,  created  a  partnership  or 
an  unincorporated  joint-stock  company,  or  a  trust  as  distin- 
guished from  a  partnership  or  such  company.  We  have  exam- 
ined the  trust  agreement  in  question  and  the  authorities  at  our 
command  bearing  upon  the  subject  as  carefully  as  we  have 
been  able  to  do,  and  conclude  that  said  agreement  created  a 
'trust'  and  not  a  company,  association,  or  partnership."     This 

9  83   U.   S.   16  Wall.   97,  21   L.      "Business  and  Legislation." 

ed.  415.  11  Davis  v.  Hudgins,  225  S.  W. 

10  See  State  r.  Scougal,  3  S.  D.  73.  This  case  is  reported  in  full 
55,  51  N.  "W.  858,  15  L.  R.  A.  477;  herein  under  the  paragraph  ou 
44  Am.  St.  Rep.  756.     This  case  Receiver  in  Bankruptcy. 

is  reported  in  full  under  chapter 


Validity.  47 

decision  is  emphasized  by  the  United  States  Supreme  Court  in 
Crocker  v.  Malley,^''  in  differentiating  between  a  trust  and  an 
association.  The  court  makes  it  clear  that  a  pure  trust,  active 
and  functioning  as  such,  has  a  standing  in  law  as  a  trust.  In 
this  case  the  trust  was  organized  for  the  purpose  of  collecting 
rents  and  income.  Taxes  were  assessed  against  it  as  a  joint 
stock  association,  which  were  paid;  the  trust  then  filed  suit  to 
recover  taxes  paid  under  protest  to  the  collector  of  internal 
revenue.  The  taxes  were  assessed  to  the  plaintiffs  as  a  joint- 
stock  association  within  the  meaning  of  the  Income  Tax  Act  of 
October  3,  1913,  c.  16,  Section  II,  G  (a),  38  Stat.  114,  166,  172. 
and  were  levied  in  respect  to  dividends  received  from  a  corpora- 
tion that  itself  was  taxable  upon  its  net  income.  The  plaintiffs 
maintained  they  were  not  an  association  but  simply  trustees, 
and  subject  only  to  the  duties  imposed  upon  fiduciaries  by 
Section  II,  D.  The  Circuit  Court  of  Appeals  decided  that  the 
plaintiffs  together,  it  would  seem,  with  those  for  whose  benefit 
they  held  the  property,  were  an  association  and  ordered  judg- 
ment for  the  defendant,  reversing  the  judgment  of  the  District 
Court.^^  The  facts  taken  from  the  reports  in  substance  are  as 
follows : 

26 — A  Trust  to  Distribute  Income. 

A  Maine  paper  manufacturing  corporation  with  eight  share- 
holders, had  its  mills  on  the  Nashua  River  in  Massachusetts 
and  owned  outlying  land  to  protect  the  river  from  pollution. 
In  1912  a  corporation  was  formed  in  Massachusetts.  The 
Maine  corporation  conveyed  to  it  seven  mills  and  let  to  it  an 
eighth  that  was  in  process  of  construction,  together  with  the 

12  249  U.  S.  223,  63  L.  ed.  573,      270. 
2  A.  L,  R.  1601,  39  Sup.  Ct.  Rep.  13  250   Fed.   817. 


48  Trusts  for  Busine;ss  Purpose;s. 

[CROCKER    V.    >L\rLEY.] 

outlying  lands  and  tenements,  on  a  long  lease,  receiving  the 
stock  of  the  Massachusetts  corporation  in  return.  The  Maine 
corporation  then  transferred  to  the  plaintiffs  as  trustees,  the 
fee  of  the  property  subject  to  lease,  leaving  the  Massachusetts 
stock  in  their  hands,  and  was  then  dissolved.  By  the  terms  of 
the  declaration  of  trust  the  plaintiffs  declared  that  they  held 
the  real  estate  and  all  other  property  at  any  time  received  by 
them  thereunder,  subject  to  the  provisions  thereof,  "for  the 
benefit  of  the  cestui  que  trusts  (who  shall  be  trust  beneficiaries 
only,  without  partnership,  associate  or  other  relation  whatever 
inter  sese)'"  upon  trust  to  convert  the  same  into  money,  and 
distribute  the  net  proceeds  to  the  persons  then  holding  the 
trustees'  receipt  certificates — the  time  of  distribution  being  left 
to  the  discretion  of  the  trustees,  but  not  to  be  postponed  be- 
yond the  end  of  twenty  years  after  the  death  of  specified  per- 
sons then  living.  In  the  meantime,  the  trustees  were  to  have 
the  powers  of  ow^ners.  They  were  to  distribute  what  they 
determined  to  be  fairly  distributable  net  income  according  to 
the  interests  of  the  cestui  que  trusts,  but  could  apply  any  funds 
in  their  hands  for  the  repair  or  development  of  the  property 
held  by  them,  or  the  acquisition  of  other  property,  pending  con- 
version and  distribution.  The  trust  was  organized  and  put  in 
force  because  of  the  determination  of  the  Maine  corporation 
to  dissolve  without  waiting  for  the  final  cash  sale  of  its  real 
estate  and  was  declared  to  be  for  the  benefit  of  the  eight  share- 
holders of  the  Maine  Company  who  were  to  receive  certificates 
subject  to  transfer  and  subdivision.  Then  followed  a  more  de- 
tailed statement  of  the  power  of  the  trustees  and  provision  for 
their  compensation,  not  exceeding  one  per  cent  of  the  gross 
income  unless  with  the  written  consent  of  a  majority  in  interest 
of  the  cestui  que  trusts.  A  similar  consent  was  required  for 
the  filling  of  a  vacancy  among  the  trustees,  and  for  a  modifica- 


Validity.  49 

[CROCKER    V.    >IAXLEV.] 

tion  of  the  terms  of  the  trust.  In  no  other  matter  had  the 
beneficiaries  any  control.  The  title  of  the  trust  was  fixed  for 
convenience  as  The  Massachusetts  Realty  Trust.  Taxes  were 
assessed  against  this  trust  on  the  theory  that  it  was  an  associa- 
tion; the  court  upon  examining  the  instrument  creating  the 
trust  said : 

"The  declaration  of  trust  on  its  face  is  an  ordinary  real 
estate  trust  of  the  kind  familiar  in  A'lassachusetts  unless  in  the 
particular  that  the  trustees'  receipt  provides  that  the  holder 
has  no  interest  in  any  specific  property  and  that  it  purports  only 
to  declare  the  holder  entitled  to  a  certain  fraction  of  the  net 
proceeds  of  the  property  when  converted  into  cash  'and  mean- 
time to  income.'  The  only  property  expressly  mentioned  is  the 
real  estate  not  transferred  to  the  Massachusetts  corporation. 
Although  the  trustees  in  fact  have  held  the  stock  of  that  cor- 
poration and  liave  collected  dividends  upon  it,  their  doing  so 
is  not  contemplated  in  terms  by  the  instrument.  It  does  not  ap- 
pear very  clear  that  the  eight  Maine  shareholders  might  not 
have  demanded  it,  had  they  been  so  minded.  The  function  of 
the  trustees  is  not  to  manage  the  mills,  but  simply  to  collect  the 
rents  and  income  of  such  property  as  may  be  in  their  hands, 
with  a  large  discretion  in  the  application  of  it,  but  with  a  recog- 
nition that  the  receipt  holders  are  entitled  to  it,  subject  to  the 
exercise  of  the  powers  confided  to  the  trustees.  In  fact,  the 
whole  income,  less  taxes  and  similar  expenses,  has  been  paid 
over  in  due  proportion  to  the  holders  of  the  receipts." 

27 — Functions  of  Trustees  and  Beneficiaries — Distinguished. 

The  question  as  to  the  rights  and  powers  of  the  certificate 
holders  was  involved  in  this  case";  their  rights  and  the  extent 
of  their  actions  govern  in  determining  whether  the  instrument 


50  Trusts  for  Business  Purposes. 

[CROCKER   V.    MAXLEY.] 

created  a  trust,  partnership  or  association.  The  court  taking 
up  this  provision  in  the  instrument  said:  "There  can  be  Httle 
doubt  that  in  Massachusetts  this  arrangement  would  be  held  to 
create  a  trust  and  nothing  more.  The  certificate  holders  are  in 
no  way  associated  together,  nor  is  there  any  provision  in  the 
instrument  for  any  meeting  to  be  held  by  them.  The  only  act 
under  the  declaration  of  trust  which  they  can  do  is  consent  to 
an  alteration  of  the  trust  and  to  the  other  matters  that  we  have 
mentioned.  They  are  confined  to  giving  or  withholding  as- 
sent, and  the  giving  or  withholding  it  is  not  to  be  had  in  a 
meeting  but  is  to  be  given  by  them  individually.  The  sole  right 
of  the  cestuis  que  trust  is  to  have  the  property  administered  in 
their  interest  by  the  trustees  who  are  the  masters,  to  receive 
income  while  the  trust  lasts,  and  their  share  of  the  corpus  when 
the  trust  comes  to  an  end."^* 

The  trust  was  assessed  as  an  association  under  Section  II, 
G  (a)  but  the  contention  of  the  trustees  was  that  they  were  not 
an  association,  but  a  pure  trust,  and  as  fiduciaries  they  were 
called  upon  only  to  make  a  return  of  the  net  income  of  the  per- 
son for  whom  they  acted— as  provided  in  Section  II,  D.  The 
court,  in  deciding  this,  said :  "The  question  is  whether  a  differ- 
ent view  is  required  by  the  terms  of  the  present  act.  As  by  D 
referred  to,  trustees  and  associations  acting  in  a  fiduciary  ca- 
pacity have  the  exemption  that  individual  stockholders  have 
from  taxation  upon  dividends  of  a  corporation  that  itself  pays 
an  income  tax,  and  as  the  plaintiffs  undeniably  are  trustees,  if 
they  are  to  be  subjected  to  a  double  liability  the  language  of 
the  statute  must  make  the  intention  clear."^^ 

In   commenting   further   on   this   question,    the   court   said : 

14  Wiliams      v.      Milton,      215       151-3,  38   Sup.   Ct.   53,   62  L.  ed. 
Mass.  1,  102  N.  E.  355.  211;   United  States  v.  Isham,  17 

16  Gould   V.    Gould,    245   U.    S.      Wall.  496,  504,  21  L.  ed.  728. 


Validity.  51 

[CROCKER   V.    jVL4L.L,EV.] 

"The  requirement  of  G  (a)  is  that  the  normal  tax  therein- 
before imposed  upon  individuals  shall  be  paid  upon  the  entire 
net  income  accruing  from  all  sources  during  the  preceding  year 
'to  every  corporation,  joint-stock  company  or  association,  and 
every  insurance  company  organized  in  the  United  States,  no 
matter  how  created  or  organized,  not  including  partnerships.' 
The  trust  that  lias  been  described  would  not  fall  under  any 
familiar  conception  of  a  joint-stock  association,  whether  formed 
under  a  statute  or  not.^^  If  we  assume  that  the  words  'no  mat- 
ter how  created  or  organized'  apply  to  'association,'  and  not 
only  to  'insurance  company,'  still  it  would  be  a  wide  departure 
from  normal  usage  to  call  the  beneficiaries  here  a  joint-stock 
association  when  they  are  admitted  not  to  be  partners  in  anv 
sense,  and  when  they  have  no  joint  action  or  interest  and  no 
control  over  the  fund.  On  the  other  hand,  the  trustees,  by 
themselves,  cannot  be  a  joint-stock  association  within  the  mean- 
ing of  the  act,  unless  all  trustees  with  discretionary  powers  are 
such,  and  the  special  provision  for  trustees  in  D  is  to  be  made 
meaningless.  We  perceive  no  ground  for  grouping  the  two — 
beneficiaries  and  trustees — together  in  order  to  turn  them  into 
an  association,  by  uniting  their  contrasted  functions  and  pow- 
ers, although  they  are  in  no  proper  sense  associated.  It  seems 
to  be  an  unnatural  perversion  of  a  well-known  institution  of  the 
law. 

We  do  not  see  either  that  the  result  is  affected  by  any  tech- 
nical analysis  of  the  individual  receipt  holder's  rights  in  the 
income  received  by  the  trustees.  The  description  most  in  ac- 
cord with  what  has  been  the  practice  would  be  that,  as  the  re- 
ceipts declare,  the  holders  until  distribution  of  the  capital  were 


16  Smith   V.   Anderson,    15    Ch.      Freeman,  220  U.  S.  178,  186,  31 
D.    247,    273-4-7,    282;    Elliott    v.      Sup.  Ct.  360,  55  L.  ed.  424. 


52  Trusts  for  Business  Purposes. 

[CROCKER   V.    3IALLEY.] 

entitled  to  the  income  of  the  fund,  subject  to  an  unexercised 
power  in  the  trustees  in  their  reasonable  discretion  to  divert  it 
to  the  improvement  of  the  capital.  But  even  if  it  were  said 
that  the  receipt  holders  were  not  entitled  to  the  income  as 
such  until  they  got  it,  we  do  not  discern  how  that  would  turn 
them  into  a  joint  stock  company.  IMoreover  the  receipt  holders 
did  not  get  it  and  the  question  is  what  portion  it  was  the  duty 
of  the  trustees  to  withhold.  We  presume  that  the  taxation  of 
corpoi-ations  and  joint-stock  companies  upon  dividends  of  cor- 
porations that  themselves  pay  the  income  tax  was  for  the  pur- 
pose of  discouraging  combinations  of  the  kind  now  in  disfavor, 
by  which  a  corporation  holds  controlling  interests  in  other  cor- 
porations which  in  their  turn  may  control  others,  and  so  on, 
and  in  this  way  concentrates  a  power  that  is  disapproved. 
There  is  nothing  of  that  sort  here.  Upon  the  whole  case,  we 
are  of  opinion  that  the  statute  fails  to  show  a  clear  intent  to 
subject  the  dividends  on  the  Massachusetts  corporation's  stock 
to  the  extra  tax  imposed  by  G  (a). 

The  plaintiffs  as  they  themselves  alleged  in  their  claim,  were 
the  persons  taxed,  whether  they  were  called  an  association  or 
trustees.  They  were  taxed  too  much.  If  the  United  States 
retains  from  the  amount  received  by  it  the  amount  that  it 
should  have  received,  it  cannot  recover  that  sum  in  a  subse- 
quent suit.  Judgment  of  the  Circuit  Court  of  Appeals  reversed. 
Judgment  of  the  District  Court  affirmed." 

In  this  case  we  have  the  language  of  the  United  States  Su- 
preme Court  giving  validity  to  the  trust  as  a  business  organiza- 
tion :  "we  perceive  no  ground  for  grouping  the  two — bene- 
ficiaries and  trustees — together  in  order  to  turn  them  into  an 
association,  by  uniting  their  contrasted  functions  and  powers, 
although  they  are  in  no  proper  sense  associated."  This  rule 
laid  down  from  our  court  of  last  resort,  recognizing  the  trust 


I 


Validity.  53 

as  an  entity,  establishes  the  law  we  are  to  follow.  Trust  ajrree- 
ments  which  properly  set  forth  the  powers  and  duties  of  the 
trustees,  with  limitation  on  the  beneficiaries,  come  within  this 
rule  i^''  trusts  of  this  character  will  have  no  trouble  on  that  score 
in  other  jurisdictions. 

Public  Policy. 
28 — In  General. 

It  would  seem  to  be  almost  unnecessary  to  discuss  the  trust 
in  its  relation  to  the  public  policy  of  the  state,  in  view  of  its 
validity  and  the  recognition  of  its  rights,  established  by  the 
judiciary  of  the  country.  However,  there  are  three  decisions 
spoken  of  freely,  and  in  some  instances  they  have  been  used  as 
an  argument  as  to  why  the  trust,  as  such,  is  against  the  public 
policy  of  the  state;  two  of  these  are  in  Ohio  and  in  neither  of 
these  was  the  trust  question  involved.  The  third  is  an  Illinois 
case,  and  in  that  one  there  is  no  reference  to  the  trust  being 
against  public  policy. 

One  of  the  Ohio  cases  is  known  as  the  State  v.  Manufac- 
turers Mutual  Fire  Association  ;i8  in  this  case  proceedings  were 
instituted  to  oust  the  Mutual  Fire  Association  from  exercising 
the  franchise  of  a  corporation  under  the  laws  of  Ohio.  The 
petition  stated  that  the  Manufacturers  Mutual  Fire  Association 

iTConnally  v.  Lyons,  82  Texas  Anderson,   15   Ch.   D.  247;    State 

664,    18    S.    W.    799,    21    Am.    St.  v.  Lee,  233  S.  W.  20.     See  Trust 

Rep.    935;     Williams    v.    Milton,  Not    partnership,    under    Trusts 

215    Mass.    1,    102    N.    E.    355;  Distinguished    From    Other    Or- 

Rhode  Island  Hospital  Trust  v.  ganizations. 

Copeland,   39   R.    I.   193,   98   Atl.  18  50    Ohio    St.    145,    33    N.    E. 

273;    Mayo  v.   Moritz,   151   Mass.  401,  24  L.  R.  A.  252. 
481,    24    N.    E.    1083;     Smith    v. 


54  Trusts  for  Business  Purposes. 

was  a  corporation  duly  incorporated  under  the  laws  of  the 
State  of  Ohio.  The  association  was  organized  under  a  special 
act  providing  for  the  Manufacturers  Mutual  Insurance  Asso- 
ciation; it  was  found  that  it  violated  the  act  in  question;  that 
it  had  been  exercising  powers  and  franchises  not  authorized  by 
the  statute;  and  for  these  reasons  the  prayer  in  the  petition  of 
ouster  was  granted.  There  was  no  question  of  a  trust  involved, 
so  the  decision,  while  it  has  been  used  in  reference  to  trusts, 
has  no  application  whatever. 

The  other  Ohio  case  is  State  v.  Ackerman;^^  it  is  said  that 
the  Attorney  General  of  Ohio  cites  this  case  in  support  of  his 
contention  that  proceedings  in  quo  warranto  may  be  brought 
against  any  association  of  persons  who  act  in  the  state  without 
being  legally  incorporated.^^  The  facts  in  that  case  show  that 
an  organization  was  put  together  for  the  purpose  of  writing 
insurance  in  the  state  of  Ohio ;  a  copy  of  the  agreement  will  be 
found  in  the  appendix  herein,  and  is  interesting  reading  from 
the  viewpoint  of  an  association.  The  petition  was  filed  against 
C.  F.  Ackerman  and  ninety-nine  other  persons  who  were 
transacting  the  business  of  guarantee  and  accident  insurance 
in  the  state  of  Ohio  under  the  name  of  the  Guarantee  and  Ac- 
cident Lloyds,  New  York,  to  oust  them  from  carrying  on  that 
business,  because  they  had  not  complied  with  the  laws  of  the 
state  or  received  any  authority  from  it  to  do  business  of  that 
kind.  Ohio  has  a  statute  which  provides  that  quo  warranto 
may  be  maintained  first,  against  a  person  wlio  unlawfully  ex- 
ercises a  franchise;  second,  against  an  association  of  persons 
who  act  as  a  corporation  within  the  state  without  being  legally 
incorporated;  the  action  in  this  case  was  to  prosecute  on  both 
grounds. 

19  51    Ohio    St.    163,    37    N.    E.  20  Sears,  2nd  Ed.  344. 

828,  24  L.  R.  A.  298. 


Validity.  55 

It  was  claimed  that  the  laws  of  Ohio  did  not  apply  to  the 
defendants  because  they  were  not  a  corporation,  company,  or 
association,  or  acting  as  such;  but  that  in  making  contracts  of 
insurance  each  individual  acted  for  himself.  However,  the 
court  did  not  adopt  that  view,  but  said  that  an  examination  of 
their  articles  of  agreement  showed  that  they  had  associated 
themselves  together  in  a  business  under  a  common  name,  and 
that  the  capital  was  under  the  control  of  a  board  of  managers; 
that  the  language  of  the  petition  showed  sufficiently  that  the 
defendants  in  transacting  the  business  of  insurance  in  the  state 
were  exercising  unlawfully  a  franchise  within  the  state,  and 
were  acting  as  a  corporation  therein  without  being  legally  in- 
corporated. In  reaching  its  decision,  the  court  cites  the  Illinois 
case,  Green  v.  People.^^  This  latter  case  does  not  touch  on  the 
question  of  trust ;  that  issue  was  not  raised,  so  the  decision 
throws  no  light  on  the  subject  of  the  trust  as  operating  against 
public  policy.  If,  however,  the  defendants  had  been  a  pure 
trust  engaged  in  the  insurance  business,  we  might  have  had 
some  law  applicable  to  the  trust  problem.  This  case  will  be 
discussed  in  connection  with  the  report  of  the  Attorney  Gen- 
eral of  Illinois,  which  report,  on  page  422,  Quarterly  No.  4, 
1919,  reads  as  follows :  "The  transfer  of  property  to  a  'man- 
ager' and  a  'subscribers'  committee'  of  five  persons,  giving  them 
general  and  complete  supervision  and  management  in  the  pui- 
chase  and  improvement  of  real  estate  with  the  right  of  mort- 
gage, exchange  or  sale,  etc.,  the  title  to  all  of  the  property  to  be 
in  the  'manager,'  or  in  such  person  or  corporation  as  he  may 
designate,  absolving  the  'manager'  and  the  'subscribers'  com- 
mittee' from  liability  for  error  of  judgment,  and  limiting  the 
liability  to  all  participants  to  the  amount  subscribed,  evidenced 

21 150  111.  513,  37  N.  E.  842. 


56  Trusts  for  Business  Purposes. 

by  subscription  certificates,  may  or  may  not  constitute  the  cer- 
tificate holders  partners,  but  the  arrangement  or  agreement  is 
against  public  policy  in  that  it  attempts  to  permit  the  exercise 
of  corporate  powers  without  corporate  safeguards." 

On  Page  425  of  the  same  report,  the  Attorney-General,  in 
writing  to  the  Secretary  of  State  in  reference  to  a  syndicate 
agreement,  says :  "As  to  such  an  organization  being  against  the 
policy  of  this  State  by  reason  of  the  fact  that  the  agreement 
seeks  to  limit  the  liability  of  the  certificate  holders  and  makes 
said  certificates  negotiable  as  set  forth  in  Sections  7  and  14  of 
said  agreement,  I  desire  to  call  your  attention  to  the  case  of 
Green,  et  al.,  v.  People,  ex  rel.,  in  which  the  court  held  that: 
'An  association  or  number  of  persons  in  the  business  of  insur- 
ance, by  professedly  limiting  their  liability  to  the  amount  of 
money  contributed  by  each,  and  assuming  to  give  perpetuity  to 
the  business  by  making  membership  certificates  trans ferrable 
by  the  assignment  of  the  member  or  his  personal  representa- 
tive, will  thereby  act  as  a  corporation,  and  will  be  liable  to 
judgment  of  ouster.  And  the  fact  that  such  persons  may  be 
held  mdividually  liable  upon  policies  of  insurance  which  they 
may  have  issued,  will  not  relieve  them  of  the  charge  of  having 
acted  as  a  corporation.'  " 

The  case  of  Green  v.  People,  supra,  is  the  third  case  cited 
occasionally  as  upholding  the  theory  that  it  is  against  the  public 
policy  of  the  State  of  Illinois  for  a  business  to  be  conducted 
under  a  trust  agreement.  On  examining  this  case  we  find  that 
some  parties  organized,  and  then  engaged  in  the  insurance  busi- 
ness; in  their  organization  they  limited  their  liability  to  the 
amount  of  money  contributed  by  each,  and  assumed  to  give 
perpetuity  to  the  business.  Had  this  organization  been  before 
the  court  as  a  pure  trust,  it  would  have  been  bad  in  these  two 
features.     First,  the  liabilitv  should  have  been  limited  to  the 


Validity.  57 

assets  of  the  organization,  and  not  to  what  was  paid  in  by  the 
organizers.  Second,  by  trying  to  give  perpetuity  to  the  or- 
ganization, they  violated  one  of  the  fundamental  elements  of 
the  trust — the  Rule  against  Perpetuities.  Either  one  of  these 
reasons  would  have  been  sufficient  to  bar  these  parties  from 
Illinois  or  any  other  state  as  a  trust,  irrespective  of  what 
business  it  might  be  engaged  in ;  but  this  argues  nothing  for  or 
against  the  trust,  for  the  trust,  as  such,  was  in  no  way  involved 
in  the  case  or  in  the  findings  of  the  court.  A  trust  correctly 
formed  cannot  properly  be  designated  a  corporation,  partner- 
ship, association,  or  anything  but  a  trust. ^^  In  this  decision 
there  is  not  a  word,  either  expressed  or  implied  that  it  is  il- 
legal, improper,  or  against  the  public  policy  of  the  State  of 
Illinois  for  a  business  to  be  carried  on  under  a  trust  agreement. 
Referring  again  to  the  Attorney-General's  Report  of  Illinois 
for  1919,  we  find  this  language  on  page  350:  "Even  if  the 
agreement  were  interpreted  to  create  a  valid  trust,  I  think  that 
the  trustees  in  selling  and  in  advertising  for  sale  these  securities 
by  which  the  trust  fund  is  to  be  increased,  must  be  held  to 
comprise  an  association."  The  Supreme  Court  of  Texas  an- 
swers this  squarely^^  by  saying  that  the  trust  is  a  trust  pure 
and  simple,  and  is  not  to  be  called  something  it  is  not ;  further 
the  United  States  Supreme  Court  says  i^*  "We  perceive  no 
ground  for  grouping  the  two  beneficiaries  and  trustees — to- 
gether in  order  to  turn  them  into  an  association." 

Again  on  page  427  the  report  reads  as  follows:  "WHiile 
there  may  be  some  difference  in  the  articles  of  association  in 
the  case  above  referred  to  and  that  of  the  Reilly  Syndicate,  it 
appears  from  said  opinion  that  the  policy  of  this  state  is  against 

22  See     Paragraph — Trust     as  23  Davis   v.  Hudgins,  Supra, 

an  Entity.  24  Croclver  v.  Malley,  Supra, 


58  Trusts  for  Business  Purposes. 

such  organizations."  In  other  words,  the  office  of  the  Attorney- 
General  of  Illinois  takes  the  position  that  it  is  against  the 
public  policy  of  the  State  of  Illinois  for  a  business  to  be  carried 
on  as  a  trust. 

29 — A  Trust  for  Operating  Street  Car  Lines. 

Opposed  to  this  opinion  is  the  Supreme  Court  of  Illinois  in 
the  case  of  Venner  v.  Chicago  City  Railways  Company, ^^  in 
which  case  other  questions  such  as  a  committee  in  conjunction 
with  trustees;  common  ownership  of  stock;  transferring  stock 
to  qualify  directors;  stockholders  pooling  their  interests  for 
common  gain  or  controlling  the  management,  competition  and 
consolidation  are  also  passed  on.  The  case  grew  out  of  a  trust 
which  was  organized  for  the  purpose  of  taking  over  five  cor- 
porations that  were  operating  street  car  lines,  some  of  them 
in  Chicago,  Cook  County,  Illinois,  and  some  of  them  in  Indiana. 
The  corporations  which  composed  the  trust  and  the  number 
of  shares  of  capital  stock  of  each,  and  their  par  value,  were  as 
follows : 

No.  of  Shares  Par  Value 
Chicago  City  Railway  Company. ...  180,000  $18,000,000 
Calumet  and  South  Chicago  Ry.  Co..  50,000  5,000,000 
Southern  Street  Railway  Company.  .      8,000  800,000 

Hammond,    Whiting    &    E.    Chicago 

Ry.   Co 10,000         1,000,000 

Chicago  and  Western  Ry.  Co 720  72,000 

On  January  ist,  19 19,  Ira  M.  Cobe  and  John  W.  McKinnon 

held  all  of  this  stock,  except  10,281  shares  of  the  Chicago  City 

Railway  Company,  together  with  $7,674,000  of  the  bonds  of 

the  corporations  except  the  Chicago  City  Railways  Company. 

By  a  written  agreement  they  assigned  all  these  shares  of  stocks 

85  258  111.  523,  101  N.  E.  949. 


Validity.  59 

[VENNER   V,    CHICAGO    CITY   BY.    CO.] 

and  bonds  to  Elbert  H.  Gary,  Albert  J.  Earling  and  Samuel  M. 
Felton,  as  Trustees.  The  trust  made  provision  for  the  holding 
and  voting  by  the  trustees  of  the  stock  of  the  different  corpora- 
tions, and  for  the  creation  of  a  committee.  Clarence  H.  Ven- 
ner,  one  of  the  stockholders  in  the  Chicago  City  Railway  Com- 
pany, filed  a  bill  in  the  Superior  Court  of  Cook  County,  in 
behalf  of  himself  and  all  other  stockholders  similarly  situated, 
for  the  purpose  of  having  the  trust  declared  illegal  and  void ; 
of  enjoining  the  transfer,  holding  or  voting  by  the  trustees  of 
said  trust  of  any  shares  of  stock  in  the  Chicago  City  Railway 
Company  or  the  performance  of  any  other  act  in  pursuance 
of  the  said  agreement;  of  enjoining  the  combining,  merging, 
consolidating  or  uniting  of  the  property,  franchises,  earnings, 
capital  stock  or  management  of  the  Chicago  City  Railway  Com- 
pany with  those  of  other  defendant  corporations,  or  any  of 
them,  or  with  those  of  the  elevated  railroads  in  the  city  of 
Chicago.  Answers  were  filed,  and  cause  was  heard  on  the 
pleadings  and  evidence,  a  decree  was  rendered  dismissing  the 
bill  for  want  of  equity,  and  the  complainant  appealed. 

The  defendants  to  the  bill  were  the  Chicago  City  Railway 
Company  and  its  directors,  four  other  street  railway  companies, 
viz.,  the  Calumet  and  South  Chicago  Railway  Company,  the 
Hammond,  Whiting  and  East  Chicago  Electric  Railway  Com- 
pany, the  Southern  Street  Railway  Company  and  the  Chicago 
and  Western  Railway  Company,  Ira  M.  Cobe,  John  W.  Mc- 
Kinnon,  the  firm  of  J.  P.  Morgan  &  Company,  the  trustees  an<l 
members  of  the  committee  named  in  the  trust  agreement,,  and 
others.  The  Hammond,  Whiting  and  East  Chicago  Electric 
Railway  Company  was  an  Indiana  corporation,  having  certain 
lines  of  street  railway  in  the  state  of  Indiana  which  it  operated 
and  connected  at  the  State  line  with  the  lines  of  the  Calumet 
and  South  Chicago  Railway  Company.     The  lines  of  all  these 


6o  Trusts  for  Business  Purposes. 

[VENNER    V.    CHICAGO    CITY    RY.    CO.] 

Street  railway  companies,  except  the  Indiana  company,  con- 
nected at  various  points  with  the  lines  of  the  Chicago  City 
Railway  Company,  and  none  of  them  had  access  to  the  business 
center  of  the  City  of  Chicago  except  over  the  lines  of  the  lat- 
ter company.  This  was  the  situation  when,  on  February  ir, 
1907,  the  city  adopted  an  ordinance  authorizing  the  Chicago 
City  Railway  Company  to  construct,  maintain  and  operate  a 
system  of  street  railways  in  the  streets  of  Chicago. 

30 — Powers  Given  to  Trustees. 

The  bill  was  filed  on  January  22,  1910,  and  the  trust  agree- 
ment which  constitutes  the  cause  of  complaint  bears  date  Janu- 
ary I,  1910.  At  the  latter  date  all  the  ordinances  and  agree- 
ments which  have  been  mentioned  were  in  force  and  the 
Chicago  City  Railway  Company  was  in  possession  of  all  the 
lines  of  railway  of  all  the  corporations  named,  and  was  oper- 
ating them  in  compliance  with  the  terms  of  the  several  ordi- 
nances and  agreements.  J.  P.  Morgan  and  Company  had  been 
in  control  of  a  majority  of  the  stock  of  the  Chicago  City  Rail- 
way Company  since  before  the  passage  of  the  ordinance  of 
February  11,  1907.  The  stock  and  bonds  were  to  be  held  by 
the  trustees  and  their  successors,  with  all  the  rights  and  powers 
of  stockholders  or  bondholders,  with  full  power  of  sale  or  other 
disposition  of  all  or  any  part  thereof  during  the  lives  of  eight 
persons  named  and  during  the  life  of  the  survivor  and  twenty 
years  thereafter,  unless  the  trust  should  be  sooner  terminated. 
The  trustees  were  to  issue  $22,000,000  of  five  per  cent  bonds, 
payable  only  out  of  the  principal  and  income  of  the  trust  fund, 
and  to  execute  a  collateral  trust  indenture  with  the  First  Trust 
and  Savings  Bank  of  Chicago,  to  which  all  the  stock  and  bonds 
constituting  the  trust  fund  were  to  be  assigned  in  trust  to  secure 


Validity.  6i 

[VENNEK    V.    CHICAGO    CITY    RY.    CO.l 

the  payment  of  the  five  per  cent  bonds  which  were  then  to  be 
certified  by  the  bank.  Subject  to  the  obligation  of  the  five  per 
cent  bonds,  the  beneficial  interest  in  the  trust  fund  was  to  be 
in  the  holders  of  the  preferred  and  common  participation 
shares,  of  which  250,000  and  150,000  respectively,  transfer- 
able but  having  no  stated  value,  were  to  be  issued.  Provision 
was  made  for  the  division  of  the  net  income  from  the  fund  and 
the  final  division  of  the  principal  among  the  participation  share- 
holders. 

The  trust  agreement  further  provided  that  "subject  to  the 
provisions  of  the  indenture  securing  the  five  per  cent  bonds,  the 
trustees  shall  have  the  right  to  vote  on  any  and  all  shares  of 
stock  constituting  any  part  of  the  trust  fund,  at  any  and  all 
meetings,  regular  or  special,  of  the  corporation  or  corporations 
issuing  such  stocks,  and  subject  to  the  terms  and  provisions  of 
this  trust  agreement,  the  trustees  may  take  any  action  or  may 
give  or  execute  any  consent  or  may  take  any  step  which  the 
owners  of  such  stock  would  be  entitled  or  authorized  to  take, 
give  or  execute,  with  the  same  force  and  efifect  as  though  at 
the  time  the  trustees  were  the  absolute  owners  of  such  stock ; 
and  from  time  to  time  the  trustees  may  give  proxies  to  any 
person  or  persons  to  vote  such  stock,  but  in  voting  upon  any 
of   said   stock  the  trustees   shall   follow  the   directions  or  in- 
structions, if  any,  that  may  be  given  to  the  trustees  by  the  com- 
mittee,   and    shall    cause    their    proxies    also    to    follow    such 
directions  or  instructions.     The  trustees  and  the  committee  as- 
sume no  personal  responsibility  respecting  the  voting  of  said 
stock  or  in  the  management  thereof  or  in  respect  of  any  action 
taken  by  them  as  such  stockholders."     The  trustees  were  also 
authorized  to  transfer  to  any  person  any  shares  of  stock  in  any 
company  whose  securities  constituted  a  part  of  the  trust  fund, 
in  order  to  qualify  such  person  as  a  director  or  officer  of  such 


62  Trusts  for  Business  Purposes. 

[VENXER   V.    CHICAGO    CITY   RY.    CO.] 

company  or  for  the  purpose  of  maintaining  the  organization  of 
the  company;  to  permit  to  be  sold  or  leased  to,  or  merged  or 
consolidated  with  each  other,  any  corporations  or  companies 
any  of  whose  shares,  bonds  or  securities  constituted  any  part 
of  the  trust  fund,  and  "to  vote  upon  any  of  the  shares  con- 
stituting any  part  of  the  deposited  securities  in  favor  of  any 
lawful  consolidation,  merger  or  re-organization  of  the  prop- 
erties, franchises  or  shares  of  any  of  the  companies  whose 
shares  or  part  thereof  shall  constitute  part  of  said  trust  fund, 
with  the  properties,  franchises  and  shares  of  any  other  com- 
pany." 

31 — Trustees  Subject  to  Committee. 

In  this  trust  the  trustees  held  title  to  all  property,  but  they 
were  subject  to  a  committee  whose  will  the  trustees  must  fol- 
low. One  of  the  objections  to  the  trust  as  a  means  for  business 
organization  is  that  the  shareholders  have  no  voice  in  the 
management  of  the  bu-^iness,  and  arc  not  protected.  A  trust 
giving  the  shareholders  the  right  to  elect  a  committee  to  act  as 
an  advisory  board  with  the  trustees  would  obviate  this  diffi- 
culty. The  committee  would  not  control  the  trustees,  but  would 
be  a  means  whereby  the  shareholders  could  secure  concerted 
action  in  the  event  the  trustees  were  not  csLvrymg  out  properly 
the  spirit  of  the  trust.  However,  the  committee  in  this  case 
was  for  an  entirely  different  purpose ;  the  court  reads  a  portion 
of  the  trust  agreement  relative  to  a  committee  into  the  record, 
as  follows : 

A  committee  was  constituted  having  power  to  bind  the  hold- 
ers of  every  participation  share  as  fully  as  if  each  such  holder 
had  expressly  authorized  or  assented  to  each  act  or  proceeding  ; 
to  manage  and  control  the  trusts;  to  ascertain  and  determine 


Validity.  63 

[VENNEB    V.    CHICAGO    CITY   BY.    CO.] 

the  income,  apportion  and  direct  the  payment  on  the  participa- 
tion shares,  as  dividends,  of  any  money  or  property  appHcable 
to   such  purpose;  and  generally  to   exercise  such  powers  as 
should  be  required  for  the  proper  administration  of  the  trust. 
The  original  committee  consisting  of  eight  persons  was  named, 
but  the  election  of  the  committee  subsequently  by  the  share- 
holders was  provided  for,  and  it  was  provided  that  a  member  of 
the  committee  need  not  be  a  shareholder.     The  committee  was 
given  power  to  increase  or  decrease  the  number  of  trustees  and 
to  discharge  any  trustee.    Annual  meetings  of  the  shareholders 
were  provided  for,  at  which  the  participation  certificate  holders 
were  authorized  to  cast  a  vote  for  each  participation  share  held. 
By  the  resolution  of  a  majority  of  the  shares  any  trustee  might 
be  removed  and  the  trustees  directed  to  terminate  the  trust. 
The  trust  might  also  be  terminated  by  the  request  of  a  majority 
of  the  members  of  the  committee  and  the  First  Trust  and 
Savings  Bank,  and  it  should  be  terminated  by  the  purchase  of 
the  property  of  the  Chicago  City  Railway  Company  by  the  City 
of  Chicago,  pursuant  to  the  ordinance  of  February  11,  1907. 
No  holder  of  any  bond,  participation  certificate  or  other  se- 
curity could  terminate  the  trust  or  require  any  distribution  of 
any  of  the  securities  other  than  in  accordance  with  the  terms 
of  the  agreement,  and  the  death  of  any  trustee,  participation 
certificate-holder  or  committee  member  should  not  operate  to 
terminate  the  trust,  and  the  legal  representatives  of   such  a 
decedent  should  not  terminate  the  trust  or  have  a  right  to  re- 
quire an  accounting. 

32 — Stockholders  May  Pool  Interests. 

Venner,  the  appellant,  was  the  owner  of  200  shares  of  the 
capital  stock  of  the  Chicago  City  Railway  Company ;  one  of  his 


64  Trusts  for  Business  Purposes. 

[vexner  t.  chicago  city  ry.  co.] 

objections  to  the  trust  agreement  was  the  foregoing  excerpt 
wherein,  he  claims,  the  stockholders  of  the  Chicago  City  Rail- 
way Company  have  irrevocably  deprived  themselves  of  their 
deliberative  powers  and  duties  as  stockholders,  divested  them- 
selves of  all  control  of  the  corporation  and  placed  its  manage- 
ment in  the  hands  of  strangers.  The  court  did  not  adopt  that 
view  of  the  provision,  and  held  that  the  stockholders  might 
pool  their  interests  for  their  own  gain,  saying: 

"After  the  transfer  of  the  securities  by  Cobe  and  McKinnon 
to  the  trustees,  the  beneficial  ownership  of  the  stock  was  rep- 
resented by  the  participation  certificates.  Each  holder  of  a 
participation  certificate  was  a  beneficial  owner  of  the  169.719 
shares  of  the  stock  of  the  Chicago  City  Railway  Company  in 
proportion  to  the  number  of  his  participation  shares,  and  was 
also  the  beneficial  owner  of  the  stock  of  the  other  companies  in 
the  same  proportion.  Disregarding  the  other  companies  for 
the  present,  the  effect  of  the  transfer  was  to  place  the  legal 
title  of  the  majority  of  the  stock  of  the  Chicago  City  Railway 
Company  in  the  trustees,  together  with  the  voting  power  which 
was  thus  separated  from  the  beneficial  ownership  existing  in 
the  holders  of  the  participation  certificates,  but  was  to  be  exer- 
cised in  accordance  with  the  latters'  wishes,  as  expressed  by  a 
committee  chosen  by  them  for  this  purpose.  Such  a  trust  is 
not  necessarily  illegal.  Ordinarily,  men  may  make  any  di.s- 
position  of  their  property  they  see  fit,  and  they  may,  therefore, 
create  a  trust  in  their  personal  property  for  any  purpose  they 
deem  best,  so  long  as  the  purpose  is  not  prohibited  by  statute 
or  some  rule  of  public  policy.  There  is  no  statute  of  this  State 
which  prohibits  a  trust  of  the  stock  of  a  corporation  for  the 
purpose  of  controlling  its  management.  There  is  no  rule  of 
public  policy  in  this  state  which  prohibits  the  combination  of 
the  owners  of  a  majority  of  the  stock  of  a  corporation   for 


Validity.  65 

[VENNER   V.    CHICAGO    CITY    BY.    CO.] 

the  purpose  of  controlling  the  corporation.  On  the  contrary, 
it  has  been  expressly  held  that  a  contract  by  the  owners  of  more 
than  one-half  of  the  shares  of  stock  of  a  corporation  to  elect 
the  directors  of  the  corporation  so  as  to  secure  the  management 
of  its  property,  to  ballot  among  themselves  for  directors  and 
officers  if  they  could  not  agree,  to  cast  their  vote  as  a  unit  as  the 
majority  should  decide  so  as  to  control  the  election,  and  not  to 
buy  or  sell  stock  except  for  their  joint  benefit,  is  not  dishonest, 
violative  of  the  rights  of  others  or  in  contravention  of  public 
policy." 

The  court  cites  the  case  of  Faulds  v.  Yates**^  in  support  of 
this  view,  and  says:  'This  case  has  been  sustained  by  later 
decisions  of  this  court  f^  and  has  been  approved  by  the  de- 
cisions of  the  courts  of  other  states  ;2^  it  has  been  cited  by  text 
writers  announcing  the  law  as  therein  stated  -^^  and  we  regard 
the  decision  as  sound  in  principle.  It  is  as  legitimate  for  a 
majority  of  stockholders  to  combine,  as  for  other  people.  The 
fact  that  they  expect  'gain  and  advantage'  to  accrue  to  them 
does  not  make  the  combination  unlawful.  That  expectation 
and  intent  would  have  that  efifect  only  if  the  gain  was  to  be  at 
the  expense  of  the  corporation  or  in  some  way  was  intended  to 
work  a  wrong  on  the  other  stockholders.  If  stockholders  want 
to  make  their  power  felt,  they  must  unite.  There  is  no  reason 
why  a  majority  should  not  agree  to  keep  together."^" 

In  further  discussion,  the  court  says :  "The  stockholders 
can  control  the  affairs  of  a  corporation  only  through  the  elec- 

26  57  111.  416.  Cisco  and  North  Pacific  Railway 

27Higgins     v.     Lansingh,     154  Co.,    115    Cal.    584,    35    L.    R.   A. 

111.  301,  40  N.  E.  362;    Kantzler  309. 

V.  Bensinger,  214  111.  589.  29  Purdy's    Beach    on    Private 

28  Brightman     v.     Bates,     175  Corp.,    Sec.    704-2. 

Mass.  105 ;    Smith  v.  San  Fran-  30  Brightman   v.   Bates,   supra. 


66  Trusts  for  Business  Purposes. 

[VENNER    V.    CHICAGO    CITY   RY.    CO.] 

tion  of  directors,  and  at  every  such  election  there  is  necessarily 
a  combination  of  shares  upon  the  persons  elected.  Such  com- 
bination may  be  made  at  the  time  of  the  meeting,  but  there  is 
no  reason  why  stockholders  may  not  agree  beforehand  to  vote 
for  certain  persons  as  directors,  and  often  they  must  do  so  in 
order  to  elect  the  persons  desired.  There  is  nothing  in  the 
law  to  prevent  the  owners  of  a  majority  of  the  stock  from 
giving  proxies  to  the  same  person.  Unless  restricted  by  its 
terms  or  by  some  statutory  provision,  a  proxy  confers  on  the 
grantee  a  discretion,  unlimited  either  in  character  or  duration, 
until  revoked.  A  majority  of  the  stockholders  may,  therefore, 
by  uniting  in  the  same  proxy,  confer  upon  an  agent  unlimited 
discretion  to  vote  their  stock,  and  there  is  no  policy  of  the  law 
to  prevent  their  transferring  the  stock  to  a  trustee  with  the 
like  unrestricted  power.  It  is  the  purpose  for  which  the  trust 
was  created  which  must  determine  its  legality.  Besides  those 
already  cited,  it  has  been  decided  in  numerous  cases,^^  that  the 
pooling  of  stock  by  the  owners  for  the  purpose  of  electing  di- 
rectors and  officers  and  controlling  the  management  and  busi- 
ness of  the  corporation  was  not  against  public  policy  so  long  as 
no  fraud  was  committed  or  wrong  done  to  the  other  stock- 
holders. On  the  other  hand,  an  agreement  is  invalid  whose  ob- 
ject gives  unfair  advantage  to  the  parties  to  it  and  is  not  to 
the  benefit  of  all  the  stockholders  equally,  except  where  one 
of  the  parties  is  to  have  a  certain  office  at  a  certain  salary ;  or 
the  parties  to  the  agreement  are  to  receive  the  profits  to  be 

31  Ohio  and  Miss.  Railroad  Co.  Co.  v.  Nichols,  98  Ala.  92;    Hey 

V.   State,  49   Ohio   St.   668;    Grif-  v.   Dolphin,  92  Hun.  230;    Have- 

fith  V.  Jewett,  9  Ohio  Dec.    (Re-  mej^er  v.  Havemeyer,  43  Sup.  Ct. 

print)      627;      Weber     v.     Delia  N.  Y.  506;  Brown  v.  Pacific  Mall 

Mountain  Mining  Co.,   14   Idaho  Steam.  Co.,  5  Blatchf.  525. 
404;    Mobile    and    Ohio   Railway 


Validity.  67 

[venner  v.  chicago  city  by.  co.] 

made  out  of  certain  contracts  to  be  entered  into  by  the  manage- 
ment under  their  direction ;  or  the  stock  of  the  corporation  is 
to  be  voted  or  its  affairs  managed  by  the  determination  of  per- 
sons other  than  its  stockholders  or  by  a  minority  of  its  own 
stockhoklers.^2  Many  of  the  cases  reHed  upon  by  counsel  for 
the  appellant  (Venner)  are  of  this  character,  and  were  founded 
on  the  principle  that  the  owners  of  a  majority  of  the  stock  have 
no  right  to  use  their  power  to  advance  their  own  private  inter- 
ests at  the  expense  of  the  minority.  In  others  the  complaints 
were  made  by  parties  to  the  agreement  or  purchasers  from 
parties  to  the  agreement,  claiming  that  the  agreement  was  not 
binding  upon  them  but  was  revocable  at  their  pleasure.  Cases 
of  this  kind  are  not  in  point,  for  the  appellant  is  not  a  party 
to  the  trust  agreement  and  cannot  complain  of  its  terms  unless 
his  rights  as  a  stockholder  have  been  injuriously  affected  by 
it  or  will  necessarily  be  injuriously  aft'ected. 

33 — Directors  Elected  by  Trustees. 

It  is  not  correct  to  say  that  by  this  agreement  the  stock- 
holders have  deprived  themselves  of  their  deliberative  powers 
or  divested  themselves  of  all  control  of  the  corporation.  The 
management  of  the  corporation  is  in  the  hands  of  its  directors, 
elected  annually.  This  election  by  the  trustees,  according  to 
the  direction  of  the  committee  selected  by  the  participation 
sliareholders  who  are  the  beneficial  owners  of  the  stock,  is 
really  an  election  by  the  stockholders  through  their  proxies, 

32  Guernsey  v.  Cook,  120  Mass.  Inflatable  Tire  Co.,  52  N.  J.  Eq. 

501;       Shepaug      Voting      Trust  178;  Morel  v.  Hoge,  130  Ga.  625; 

Cases,   60   Conn.   553;    Kreisel   v.  Hafer  v.  New  York,  Lake  Erie  & 

Distilling  Co.  of  America,  61  N.  West.  Rd.  Co.,  9  Ohio  Dec.   (Re- 

J.    Eq.    50;    Cone   v.   Russell,    48  print)   470. 
N.  J.  Eq.  208;  White  v.  Thomas 


68  Trusts  for  Business  Purposes. 

[VENNEB   V.    CHICAGO    CITY   BY.    CO.] 

i.  e.  their  agents  empowered  to  act  for  them  These  share- 
holders clearly  have  the  right  to  agree,  at  every  annual  election, 
to  have  the  vote  of  all  of  the  shares  cast  as  the  committee  then 
selected  may  determine.  Whether  the  agreement  binds  all  the 
shareholders  so  that  they  cannot  withdraw  from  it  is  a  question 
which  does  not  concern  the  appellant.  So  long  as  the  share- 
holders are  satisfied  and  continue  to  act  in  accordance  with  it 
no  one  else  has  any  right  to  complain.  So  far  as  this  question 
is  concerned,  the  fact  that  the  shareholders,  besides  owning 
169,719  shares  of  the  stock  of  the  Chicago  City  Railway  Com- 
pany, also  own  the  whole  stock  of  the  other  corporations,  is 
immaterial.  The  appellant  is  interested  only  in  the  Chicago 
City  Railway  Company,  and  so  long  as  that  company  is  man- 
aged in  a  lawful  manner  with  all  due  regard  to  his  interests  as 
a  stockholder  in  it,  he  has  no  cause  of  complaint. 

If  the  trust  agreement  had  concerned  only  the  stock  of  the 
Chicago  City  Railway  Company,  the  appellant  would  have  had 
no  legal  ground  of  complaint,  because  the  participation  share- 
holders, being  the  owners  of  the  majority  of  the  stock,  had  the 
right  to  control  the  election  of  directors  and  officers  and  the 
management  of  the  business  through  their  committee  selected 
by  themselves.  The  appellant  contends,  however,  that  the  trust 
agreement  placed  the  management  and  control  of  the  coq:)ora- 
tion  in  the  hands  of  outsiders,  i.  e.,  a  committee  selected  by  the 
holders  of  participation  certificates  and  not  by  the  stockholders 
of  the  corporation.  The  holders  of  the  participation  certifi- 
cates are,  however,  the  beneficial  owners  of  the  stock.  The 
fact  that  they  also  own,  jointly,  by  the  same  title  and  in  the 
same  proportions,  all  the  stock  of  the  other  corporations,  does 
not,  of  itself,  necessarily  affect  their  relation  to  the  Chicago 
City  Railway  Company.  If  the  affairs  of  that  company  are 
honestly  and  fairly  conducted  by  its  board  of  directors  selected 


Validity.  69 

[venneb  v,  chicago  city  by.  co.) 

by  its  own  stockholders  with  due  regard  to  the  equal  interest 
of  all  the  stockholders,  it  furnishes  no  cause  of  complaint  to 
the  appellant  that  the  majority  stockholders  are  owners  also  of 
other  corporations  engaged  in  a  similar  or  dissimilar  business, 
or  that  they  have  committed  the  management  of  such  other  cor- 
porations to  boards  of  directors  composed  of  the  same  persons 
as  the  board  of  directors  of  the  Chicago  City  Railway  Com- 
pany. The  common  ownership  of  the  stock  of  the  several 
corporations  is  not  in  violation  of  any  law,  and  under  the  facts 
in  the  case  imposes  no  liability  or  disability  upon  the  owners 
which  they  were  not  under  when  holding  the  stock  severally." 

34 — Coftsolidation  by  Trust  Agreement. 

Another  point  raised  in  opposition  to  the  trust  agreement 
was  that  the  deed  of  trust  practically  effected  a  consolidation 
of  the  five  street  railway  corporations  by  indirection;  that  there 
was  unity  of  ownership  and  of  management.  It  was  argued 
that  if  the  consolidation  of  these  street  railway  companies  were 
prohibited  by  the  constitution  or  by  statute,  or  if  the  effect  of 
the  arrangement  among  their  stockholders  were  to  destroy 
competition  to  the  public  injury,  this  trust  agreement  would  be 
unlawful.  Combinations  and  associations  of  corporations  or 
of  individuals  by  which  the  control  of  competing  corporations  is 
vested  in  a  single  ownership,  with  the  effect  of  destroying  com- 
petition, limiting  production,  enhancing  prices  or  monopolizing 
business,  are  unlawful.  They  are  manifestly  injurious  to  the 
public  and  their  illegal  purpose  subjects  them  to  the  condemna- 
tion of  the  law.  It  was  claimed  that  the  foregoing  principle  ap- 
plied to  this  case,  because  the  corporations  concerned  were  sub- 
ject to  the  prohibition  contained  in  Section  II  of  Article  2  of 
the  constitution  against  the  consolidation  by  any  railroad  cor- 


70  Trusts  for  Business  Purposes. 

[VENNER    V.    CHICAGO    CITY   RY.    CO.] 

poration  of  its  stock,  property  or  franchises  with  any  other 
railroad  corporation  owning  a  parallel  or  competing  line. 
On  this  question  of  consohdation  the  court  said :  "In  our  judg- 
ment that  section  of  the  constitution  has  no  application  to  street 
railways,  but  refers  to  commercial  railroads  carrying  freight 
and  passenger  traffic." 

On  the  question  of  competition,  the  court  ruled  in  the  fol- 
lowing language:  "The  City  Council  has  the  authority  to  de- 
clare the  public  policy  of  the  city  in  regard  to  the  operation  of 
street  railways,  and  the  effect  of  its  declaration  is  the  abandon- 
ment of  the  principle  of  competition  between  such  railways. 
The  combination,  union  or  merger  of  two  or  more  street  rail- 
way companies  in  the  city  of  Chicago  for  the  joint  operation  of 
their  lines  under  a  single  management,  is  not  now  against  pub- 
lic policy,  but  is  in  accordance  with  the  declared  purpose  and 
desire  of  the  city  in  regard  to  street  railways." 

35 — Transferring  Shares  to  Qualify  Director. 

The  paragraph  of  the  trust  agreement  authorizing  the  trus- 
tees to  transfer  shares  to  any  person  to  qualify  him  as  director 
or  for  the  purpose  of  maintaining  the  organization  of  the  com- 
pany was  attacked  as  being  inconsistent  with  the  charter  of  the 
Chicago  City  Railway  Company  which  required  its  directors  to 
be  stockholders,  and  as  showing  conclusively  that  the  original 
corporations  maintained  a  formal  organization  only.  Mr. 
Busby,  the  president  of  the  Chicago  City  Railway  Company, 
testified  that  some  shares  of  that  company's  stock  were  trans- 
ferred to  him  to  qualify  him  as  a  director  and  the  stock  was 
really  owned  by  the  trustees  of  the  Chicago  City  and  Connect- 
ing Railways  Collateral  Trust.  On  this,  the  court  says:  "If 
the  transfer  of  stock  to  a  person  for  the  sole  purpose  of  qualify- 


Validity.  7^ 

[VENNEB   V.    CHICAGO    CITY   BY.    CO.] 

ing  him  as  a  director  be  regarded  as  violative  of  the  rights  of 
stockholders  of  the  Chicago  City  Railway  Company  and  of  its 
charter,  this  provision  would  not  vitiate  the  whole  trust  agree- 
ment. At  the  utmost  it  could  only  result  in  the  disregard  of 
the  provision  itself.  The  trustees  might  never  make  any  trans- 
fers of  shares  for  the  purpose  of  qualifying  a  director  and 
might  lawfully  carry  out  all  the  terms  of  the  trust  agreement 
without  doing  so.  This  provision  is  not  an  essential  part  of 
the  trust  agreement.  The  transfer  to  Mr.  Busby  is  not  shown 
to  have  been  in  violation  of  the  charter  of  the  Chicago  City 
Railway  Company,  for  it  does  not  appear  that  he  was  not  the 
holder  of  participation  shares,  and  if  so,  he  was  already  the 
beneficial  owner  of  stock  and  the  transfer  only  conveyed  to  him 
a  legal  title." 

36 — Trust  Does  Not  Imply  Incorporation. 

It  was  insisted  that  the  trust  was  unlawful  because  of  its 
assumption  of  the  name  "Chicago  City  and  Connecting  Rail- 
ways Collateral  Trust ;"  which,  it  was  said,  was  a  fictitious  cor- 
porate name,  the  assumption  of  which  was  a  violation  of 
Section  220  of  the  Criminal  Code,  and  also  subjected  the  ap- 
pellees to  a  civil  liability  under  Section  18  of  the  Incorporation 
Act.  The  court  ruled  on  this  question  as  follows :  "The  as- 
sumption of  fact  on  which  this  claim  is  based  is  unfounded. 
The  name  does  not  imply  a  corporation.  A  trust  does  not  im- 
ply a  corporation,  for  it  may  or  may  not  be  incorporated." 

37 — Merger  Not  Contrary  to  Lazv. 

The  bill  further  alleged  that  the  plans  of  the  defendants  ex- 
tended to  a  consolidation  of  the  stock,  franchises,  and  property 
of  the  Chicago  City  Railway  Company  with  various  other  pub- 


72  Trusts  for  Business  Purposes. 

[VENNER   V.    CHICAGO    CITY    BY.    CO.] 

lie  service  corporations  in  the  City  of  Chicago  and  its  vicinity, 
whereby  all  the  elevated  and  surface  street  railway  lines  in  the 
city  and  its  vicinity,  whether  they  were  doing  a  competitive 
business  or  not,  should  be  consolidated,  merged  or  combined 
under  one  control  and  ownership,  and  the  prayer  included  an 
injunction  against  such  consolidation,  combination  or  merger. 
The  decision  of  the  court  on  that  part  of  the  bill  is  as  follows : 
"It  is  admitted  that  the  defendants  desire  to  bring  about  a 
merger  or  consolidation  of  all  the  street  railways  and  elevated 
roads  in  Chicago.  It  is  not  shown  that  they  have  attempted,  or 
intend  attempting,  anything  contrary  to  law.  Counsel  for  the 
appellant  says  in  his  brief  that  the  idea  of  getting  legislative 
sanction  for  the  merger  is  an  afterthought,  and  that  the  plan 
the  promoters  have  in  mind  is  a  voting  trust.  The  record  does 
not  sustain  this  statement,  and  it  is  denied  by  the  appellees. 
While  anticipated  unlawful  acts  of  the  directors  of  a  corpora- 
tion may  furnish  ground  for  an  injunction,  fear  alone  of  such 
illegal  action  is  not  sufficient.  There  must  be  something  more 
than  the  possibility  of  illegal  action — something  more  than  mere 
apprehension.  The  act  to  be  enjoined  must  be  one,  the  doing  of 
which  is  actually  threatened  and  may  be  expected  with  reason- 
able certainty,  if  not  enjoined.  The  negotiation  between  the 
local  transportation  committee  of  the  City  Council  and  the  local 
transportation  corporations  has  not  yet  reached  a  stage  where 
any  definite  plan  has  been  evolved.  Whether  any  plan  ever 
will  be  adopted  is  uncertain.  Until  some  scheme  has  been  de- 
termined upon  the  possibility  of  injury  to  the  appellant  or  of 
unlawful  action  on  the  part  of  the  appellee  is  too  remote  to 
justify  an  injunction.  The  appellees  cannot  be  enjoined  from 
thinking  about  a  consolidation,  from  discussing  the  feasibility 
of  it,  from  taking  the  opinion  of  counsel,  or  even  from  endeav- 
oring to  obtain  legislation  to  authorize  it.     There  is  no  imme- 


Validity.  73 

diate  unlawful  action  imminent  or  threatened,  and  no  occasion 
for  the  present  issuance  of  an  injunction." 

38 — Summary. 

In  an  early  case^^  the  court  says :  "The  grantor  may  declare 
any  use  or  trust,  or  confer  any  power  upon  the  trustees  or 
others  which  he  may  choose,  so  that  their  object  is  not  pro- 
hibited by  law,  by  public  policy  or  good  morals,  and  it  will  be 
binding.  He  may  declare  the  objects  of  the  trust  and  confer 
the  power  to  execute  them  upon  the  trustee  or  upon  an- 
other." Again :  "In  general,  any  right,  interest  or  thing  which 
may  be  the  subject  of  property  may  be  granted  in  trust.  Every 
kind  of  vested  right  which  the  law  recognizes  as  valuable  may 
be  transferred  in  trust. "^^  Finally  :  "There  is  no  rule  of  public 
policy  in  this  state  which  prohibits  the  combination  of  the  own- 
ers of  a  majority  of  the  stock  of  a  corporation  for  the  purpose 
of  controlling  the  corporation."^^  Unlike  the  trust,  corpora- 
tions are  not  organized  as  a  matter  of  right,  they  depend  upon 
the  state  for  a  franchise  for  their  existence.  If  they  may  com- 
bine under  a  trust  agreement  without  acting  against  the  public 
policy  of  the  state,  can  it  be  said  that  individuals,  in  exercising 
their  right  to  contract  and  to  alienate  property,  commit  an  act 
against  the  public  policy  of  the  state  in  creating  a  trust? 

33  Morrison    v.    Kelly,    22    111.       102  N.  E.  293. 
622.  36  Venner  v.  Chicago  City  Rail- 

84  Burke  v.  Burke,  259  111.  262,      way  Co.,  Supra. 


CHAPTER  III. 
TRUSTOR,  CREATOR  OR  SETTLOR. 

39 — Who  May  Be. 

In  general,  every  person  competent  to  make  a  will,  enter  into 
a  contract,  or  hold  the  legal  title  to  property,  has  the  power  to 
create  a  trust,  and  he  may  dispose  of  his  property  in  that  way.^*^ 
However,  he  must  be  possessed  of  the  legal  title  and  in  addition 
to  a  mere  intention  to  convey  in  trust,  must  make  an  actual 
conveyance.^''^  The  intention  of  a  trustor  is  to  be  gathered  from 
the  trust  instrument  itself,  read  in  the  light  of  attendant  cir- 
cumstances known  to  him,  or  reasonably  presumed  to  have  been 
contemplated  by  him,^^ 

40 — May  Create  for  His  Benefit  or  Others. 

The  law  is  well  settled  that  a  trustor  may  convey  his  property 
in  trust  for  his  own  benefit,  or  for  the  benefit  of  others.^^  He 
may  create  for  his  benefit  and  others,  but  he  cannot  settle  it 


36  Skeen  v.  Marriott,  22  Utah 
73,  61  Pac.  296;  Haulman  v. 
Haulman,  164  la.  471,  145  N.  W. 
930;  Butler  v.  Badger,  128  Minn. 
99,  150  N.  W.  233. 

87  Reynolds  v.  Thompson,  161 
Ky.  772,  171  S.  W.  379. 

88  President  etc.  Harvard  v. 
Atty.  Gen.,  228  Mass.  396,  117 
N.  E.  903. 

89Colvin  V.  Martin,  68  App. 
Dlv.  633,  74  N.  Y.  Sup.  11;   Day- 


ton V.  Stewart,  99  Md.  643,  59 
Atl.  281;  Whittemore  v.  Equi- 
table Trust  Co.,  162  App.  Div. 
607,  147  N.  Y.  Sup.  1058;  Mercer 
V.  Safe  Deposit  &  Trust  Co.,  91 
Md.  102,  45  Atl.  865;  Berry  v. 
Dunham,  202  Mass.  133,  88  N.  E. 
904;  Dorman  v.  Balestier,  175 
N.  Y.  Sup.  677;  Adams  v.  Nel- 
son, 1  Ohio  S.  &  C.  P.  Dec.  216; 
Mayo  V.  Moritz,  151  Mass.  481, 
24  N.  E.  1083. 


(74) 


Trustor,  Creator  or  Sbittlor.  75 

in  trust  to  pay  the  income  to  himself  while  exempting  the  prop- 
erty from  liability  for  his  existing  debts.*® 

41 — May  Act  as  Trustee. 

The  trustor,  in  creating  the  trust,  may  declare  himself  a 
trustee.*^  To  transfer  personalty  from  the  owner  to  a  trustee 
for  another,  there  must  be  a  present  and  permanent  change 
of  title;  where  the  owner  makes  himself  the  trustee,  the  title 
must  pass  from  him  individually  so  that  he  will  hold  the  prop- 
erty for  the  beneficiary.*^ 

42 — Revocation  of  Instrument. 

A  voluntary  settlement  fully  executed  by  a  person  of  sound 
mind,  without  any  mistake,  fraud,  or  undue  influence,  is  bind- 
ing upon  him  and  cannot  be  revoked,  except  so  far  as  a  power 
of  revocation  has  been  reserved  in  the  deed.*^  Where  a  trustor 
does  not  misapprehend  the  contents  of  the  deed  creating  the 
trust,  and  no  power  of  revocation  is  reserved  and  no  fraud  or 
undue  influence  shown,  the  trustor  is  bound,  though  he  over- 
looked some  contingency.**  In  the  absence  of  fraud,  mistake, 
or  some  similar  ground  of  relief,  a  settlor  cannot,  by  failing  to 
recognize  the  trust,  or  even  by  repudiating  it,  affect  the  rights 
of  the  trustee  and  beneficiary  which  have  vested  under  the 
deed.*^ 

40  Rice  V.  Merrill,  223  Mass.  Natl.  Bank  v.  Newgass,  161  App. 
279,  111  N.  E.  860.  Div.  769,  147  N.  Y.  Sup.  4;  Thorp 

41  State  V.  Ellison,  216  S.  W.  v.  Lund,  227  Mass.  474,  116  N. 
967.  E.   946. 

42  Citizens'  Natl.  Bank  v.  Mc-  44  Dayton  v.  Stewart,  99  Md. 
Kenna,  168  Mo.  App.  254,  153  S.  643,  59  Atl.  281. 

W.   521.  45  Nichols   v.   Emery,    109   Cal. 

43  Keyes  v.  Carleton,  141  Mass.       323,  41  Pac.  1089. 
45,  6  N.  E.  524;  Drovers'  Deposit 


CHAPTER  IV. 
TRUST  PROPERTY. 

43 — In  General.  • 

One  of  the  necessary  elements  of  a  trust  is  its  property,  and 
anything  which  may  be  the  subject  of  property  may  be  granted 
in  trust.  In  general,  any  right,  interest  or  thing  which  may 
be  the  subject  of  property  and  every  vested  right  which  the 
law  recognizes  as  valuable,  may  be  granted  in  trust.*®  A  trust 
is  said  to  exist  whenever  the  legal  title  is  in  one  person  and 
the  equitable  title  in  another ;  or  when  the  title  is  in  one  person 
and  the  ownership  in  another.*'  Trust  property  is  not  liable 
for  the  personal  debts  of  the  trustee,  though  any  beneficial 
interest  the  trustee  has  in  the  estate  may  be  reached  by  attach- 
ment or  otherwise.*^ 

44 — Purchasing  by  Trustee. 

The  general  rule  is  that  one  who  occupies  the  position  of 
trustee  for  the  benefit  of  others  is  incapable  of  purchasing  the 
trust  property  for  himself,  either  at  a  public,  private  or  judicial 
sale.  In  such  case  the  beneficiaries  have  the  option  to  affirm, 
or  within  a  reasonable  time  set  aside,  the  sale,  and  in  case  of 
affirmance,  to  require  an  accounting  of  the  profits;  no  fraud 
on  the  part  of  the  trustee  so  purchasing  need  be  shown  to  give 

46  Burke  v.  Burke,  259  111.  262,      Mo.  App.  404,  167  S.  W.  634. 
102  N.  E.  293.  48  Barnes   v.   Spencer,   79   Ore. 

47  Shelton     v.     Harrison,     182       205,  153   Pac.  47. 


Trust  Property.  tj 

the  shareholder  the  benefit  of  the  purchase.*^  A  party  holding 
a  fiduciary  relation  to  trust  property  cannot,  either  directly  or 
indirectly,  become  the  purchaser  of  such  property  or  transfer 
it  to  his  own  use  for  his  own  benefit;  if  he  does,  the  sale  or 
transfer  is  voidable  and  will  be  set  aside  at  the  mere  pleasure 
of  the  beneficiaries,  although  such  fiduciary  may  have  paid  a 
full  price  and  gained  no  advantage.^**  Public  policy  is  opposed 
to  the  unrestricted  right  of  a  trustee  to  acquire  the  property  of 
a  cestui  que  trust;  a  sale  by  a  trustee  to  himself  of  the  trust 
property  is  voidable  at  the  option  of  the  beneficiary,  though 
the  trustee  may  have  given  an  adequate  price  and  gained  no 
advantage.^^ 

Where  trust  property  has  been  acquired  by  a  trustee  by  di- 
rect dealing  with  the  cestui  que  trust,  the  dealings  are  presumed 
to  be  invalid  but  will  be  supported  if  the  trustee  can  establish 
that  the  cestui  que  trust  acted  voluntarily,  with  freedom  from 
any  influence  arising  from  the  trust  relation,  with  intelligence, 
and  full  knowledge  of  all  the  circumstances.^*  To  sustain  a 
sale  of  trust  property  by  the  trustees  to  themselves  individually 
— on  the  ground  that  an  adult  shareholder  consented  thereto — 
the  evidence  must  show  the  good  faith  of  the  transaction,  the 
adequacy  of  the  consideration,  a  full  knowledge  of  the  facts, 
and  independent  thought  on  the  part  of  the  shareholder.^' 
While  a  trustee  may  not  buy  the  trust  property  at  his  own  sale, 
or  act  inconsistently  with  his  duties  under  the  trust  which  re- 
quire the  strictest  honesty  and  good  faith  in  his  dealings  with 
his  beneficiary,  nevertheless,  if  the  beneficiary  be  sui  juris,  and 

49  Kamilton  v.  Dooly,  15  Utah  Eq.  102,  75  Atl.  974. 

280,  49  Pac.  769.  52  Swift  v.  Craighead,  Supra. 

60  Johnson  v.  United  Rys.  Co.  63  Clay  v.  Thomas,  178  Ky. 
(Mo.),   219   S.  W.   39.  199,  198  S.  W.  762. 

61  Swift  V.  Craighead,  75  N.  J. 


78  Trusts  for  Business  Purposes. 

the  contract  between  the  parties  fair  and  reasonable,  untainted 
by  fraud  and  undue  influence,  a  conveyance  of  trust  property 
by  the  beneficiary'  to  the  trustee  will  be  upheld.^*  Though  a 
trustee  must  act  in  good  faith  for  the  benefit  of  the  share- 
holders, he  is  not  precluded — where  he  has  no  control  over  the 
matter — from  acting  in  his  own  behalf,  and  where  he  has  an 
interest  to  protect  he  may  buy  in  the  trust  property.^^  When 
the  circumstances  warrant  it,  a  trustee  may,  by  special  applica- 
tion to  a  court  of  equity,  obtain  a  decree  under  which  he  wHl 
be  entitled  to  purchase  and  hold  trust  property  freed  from  the 
trust.^^ 


45 — Purchasing  Beneficial  Interests  by  Trustees. 

A  trustee  or  an  agent  may  purchase  the  trust  property  di- 
rectly from  the  shareholders  on  condition:  that  the  latter  in- 
tend that  the  former  sliall  buy ;  that  the  former  disclose  to  the 
latter  before  the  contract  is  made  every  fact  he  has  learned  in 
his  fiduciary  relation  which  is  material  to  the  sale ;  that  he  exer- 
cise the  utmost  good  faith ;  that  no  advantage  be  taken  by  mis- 
representation, concealment  of  or  omission  to  disclose  import- 
ant information  gained  as  trustee  or  agent;  that  the  entire 
transaction  be  fair  and  open.^''^  A  purcliase  by  a  trustee  of  a 
beneficial  interest  in  property,  while  regarded  with  suspicion, 
is-  not  necessarily  void  and  will  be  sustained  if  it  clearly  ap- 
pears that  there  was  no  fraud,  concealment,  or  undue  advan- 
tage.^8    Any  omission  by  the  trustee  or  agent  to  disclose  any 

54  French    v.    French,    58    Ind.  280,  49  Pac.  769. 

App.  621,  108  N.  E.  786.  57  Byrne  v.  Jones,  159  Fed.  321. 

55Hardwicke  v.  Wurmser  (Mo.  58  Slurry  v.  King,  153  Mo.  App. 

App.),  180  S.  W.  455.  710,    135    S.    W.    107;     Mills    v. 

66  Hamilton  v.  Dooly,  15  Utah  Mills,  63  Fed.  511. 


Trust  Property.  79 

fact  material  to  the  sale  learned  by  him  as  trustee,  any  mate- 
rial misrepresentation,  concealment,  or  other  disregard  of  the 
condition  renders  the  sale  and  the  contract  for  it  voidable  at 
the  election  of  the  shareholders.^^  An  agent  or  trustee  may 
lawfully  buy  the  property  of  his  shareholder  at  a  judicial  sale 
caused  by  a  third  party,  which  he  has  had  no  part  in  procuring 
and  over  which  he  has  no  control.*® 

46 — Mingling  with  Other  Property. 

The  general  rule  is  that  where  trust  funds  are  mingled  with 
private  funds,  the  entire  mixed  fund  is  impressed  with  the  trust 
to  the  extent  of  the  trust,  except  as  the  owner  of  the  private 
fund  may  separate  his  own  from  the  trust  fund;*^  the  burden 
is  on  the  trustee  to  show  clearly  the  amount  he  has  used  out  of 
his  own  funds  in  order  to  obtain  credit  therefor.*^  Wliere  he 
neglects  to  keep  a  separate  account  of  the  interest  received,  he 
is  chargeable  with  the  highest  legal  rate  of  interest  on  the  entire 
fund  and  can  be  allowed  nothing  for  his  services.*^  Where  one 
intermingles  trust  property  with  other  property  so  as  to  make 
it  difficult,  if  not  impossible,  to  prove  the  amounts  of  sale,  a 
suit  for  an  accounting  in  a  court  of  equity  may  be  maintained.** 

47 — Follozving. 

Trust  funds  wrongfully  converted  may  be  followed  into  other 

59  Byrne  v.  Jones,   Supra.  Fidelity  &  Deposit  Co.  of  Mary- 

60  Steinbeck  v.  Bon  Homme  land  v.  Rankin,  33  Okla.  7,  124 
Mining  Co.,  152  Fed.  333.  Pac.  71. 

61  Yellowstone  Co.  v.  First  62  Vanatta  v.  Carr,  299  111.  47, 
Trust  &  Savings  Bank,  46  Mont.  82  N.  E.  267. 

439,     128     Pac.     596;     Moore     v.  63  In  re  Hodges'  Estate,  66  Vt. 

First  Natl.   Bank,  154   Mo.  App.  70,   28  Atl.   663. 

516,   135    S.    W.   1005;    Evans   v.  64  Craft  v.   Craft,   74   Fla.   262, 

Evans,  200  Ala.  329,  76   So.  95;  76   So.  772. 


8o 


Trusts  i'or  Business  Purposes. 


property  as  far  as  they  can  be  identified  ;^'  property  impressed 
with  a  trust  or  the  proceeds  thereof,  may  be  followed  so  lonc^ 
as  it  can  be  identified  in  the  hands  of  subsequent  holders  who 
are  not  bona  fide  purchasers  for  value  without  notice.^^  Where 
a  trustee  conveys  all  or  part  of  the  trust  property  under  mis- 
take of  fact  to  the  prejudice  of  the  sliareholders,  such  conveyed 
property  is  subject  to  the  equitable  rig-hts  of  the  beneficiaries.^'' 
The  right  of  the  shareholders  to  pursue  a  fund  and  impose  on 
it  the  character  of  a  trust  is  based  on  the  principle  that  it  is  the 
beneficiaries'  property  and  not  a  right  of  lien  against  the  wrong- 
doer's general  estate,  whether  the  property  sought  to  be  recov- 
ered is  in  the  form  in  which  the  beneficiary  parted  with  it  or  is 
in  a  substituted  form.^^  No  change  of  form  of  property  di- 
vests it  of  the  trust;  the  substitute  takes  the  nature  of  the 
original  and  stands  charged  with  the  same  trust ;  the  authorized 
sale  of  trust  property  by  a  trustee  discharges  it  from  the  trust 
and  charges  the  proceeds  of  the  sale — in  the  hands  or  under  the 
control  of  the  trustee — with  the  trust.^^ 

Where  a  trustee  purchases  property  with  trust  funds  and 
takes  title  thereto  in  his  own  name,  equity  will  regard  such  pur- 
chase as  made  for  the  benefit  of  the  shareholder.  The  latter 
has  the  right  to  elect  whether  he  will  take  the  property  or  re- 
cover from  the  trustee  the  funds  wrongfully  diverted.''^''     Al- 


es Reaves  V.  Coffman,  87  Ark. 
60,  112  S.  W.  194;  Evans  v. 
Evans,  Supra;  McCormick  v. 
Mccormick's  Admr.  (Ky.),  121 
S.  W.  450;  Wells  v.  Messenger, 
249  111.  72,  94  N.  E.  87. 

66  Teal  v.  Pleasant  Grove  Lo- 
cal Union,  200  Ala.  23,  75  So. 
335. 

67  Teal  V.  Pleasant  Grove  Lo- 
cal Union,  Supra;  Pennington  v. 


Smith,  69  Fed.  188. 

68  Heidelbach  v.  Campbell,  95 
Wash.  661,  164  Pac.  247. 

69  United  States  v.  Thurston 
Co.  Neb.,  143  Fed.  287. 

70  Red  Bud  Realty  Co.  v. 
South,  96  Ark.  281,  131  S.  W. 
340;  Primeau  v.  Cranfield,  184 
Fed.  480;  Bohle  v.  Hasselbroch, 
64  N.  J.  Eq.  334,  51  Atl.  508. 


Trust  Property.  8i 

though  no  particular  property  can  be  identified  as  having  been 
purchased  or  acquired,  trust  funds  may  be  followed  into  the 
trustee's  estate  where  it  appears  that  they  were  mixed  and 
commingled  with  the  general  funds  and  property  of  the  trus- 
tee's estate  and  went  into  the  general  assets,  either  in  the  pur- 
chase of  paper  and  securities  or  in  the  payment  of  the  debts 
of  the  trustee.  In  such  case  the  lien  of  the  shareholder  will 
attach  against  the  entire  assets  of  the  trustee's  estate  for  the 
payment  of  such  claim.'^  Upon  the  conversion  of  trust  prop- 
erty by  the  trustee,  the  beneficiary  may  recover  in  equity  the 
value  of  the  property,  that  being  his  only  remedy  when  the 
property  has  passed  beyond  his  reach ;  where  a  trustee  has  sold 
or  pretended  to  sell  the  property  to  several  different  purchasers, 
so  as  to  involve  it  in  much  vexatious  litigation,  the  beneficiary 
could  sue  for  its  value  instead  of  following  the  property.''^  The 
equitable  remedy  given  a  shareholder  to  follow  trust  funds  into 
property — in  which  they  may  have  been  fraudulently  invested 
by  his  trustee — is  not  taken  away  in  most  states  by  statutory 
provisions  which  afiford  a  remedy  by  attachment  or  garnish- 
ment ;  the  legal  and  equitable  remedies  are  to  be  considered  con- 
current.'''^ Where  suit  is  brought  by  the  trustee  to  recover 
trust  property,  or  to  recover  for  breaches  of  trust  by  former 
trustees,  the  beneficiaries  are  not  necessary  parties.'*'* 

48 — Liability — Expenses — Fees. 

It  is  a  general  principle  that  the  trust  estate  should  bear  the 
expense  of  its  administration,  but  it  is  chargeable  only  with 

71  State  V.  Bruce,  17  Idaho  1,  73  Chaves   v.    Myer,    13    N.    M. 
102  Pac.  831;  Ellicott  v.  Kuhl,  60      368,  85  Pac.  233. 

N.  J.  Eq.  333,  46  Atl.  945.  74  In  re  Lane's  Will  (Del.),  97 

72  Sullivan    &    Co.    v.    Ramsey      Atl.  587. 
(Tex.  Civ.  App.),  155  S.  W.  580. 


82 


Trusts  for  Business  Purposes. 


those  expenses  which  are  incurred  for  the  benefit  of  all  the 
shareholders.'^  It  is  self-evident  that  if  a  trustee  has  the  oower 
of  managing  an  estate,  he  will  be  entitled  to  all  the  expenses 
of  keeping  it  up  such  as  hire  of  servants,  salaries,  costs  of 
repairs,  rebuilding  and  other  like  expenses.'''^  Counsel  fees  of 
the  trustee  for  general  and  special  work  such  as  protecting  and 
defending  the  trust  are  paid  from  trust  funds.''"''  Taxes,  in- 
terest and  other  expenses  are  generally  to  be  charged  to  and 
paid  out  of  the  income  of  a  trust  fund,  but  where  property  is 
unproductive,  such  expenses  are  chargeable  to  the  principle.''^ 
The  trust  estate  is  liable  for  damages  to  one  injured  while  in 
the  employ  of  the  trust ;  this  rule  of  law  is  clearly  and  explicitly 
set  forth  in  the  case  of  Wright  v.  Caney  River  Ry.  Co.'^^  In 
this  case  Cornelia  Wright,  as  administratrix  of  Turner  Wright, 
deceased,,  filed  suit  August  i,  1907  against  the  Caney  River 
Railway  Company,  C.  J.  Morrow,  trustee  for  creditors  of  the 
Wood-Galloway  Company  operating  the  road  at  the  time  under 
a  sub-lease,  and  Wm.  Whitmer  &  Sons,  Incorporated,  original 
lessee  of  the  defendant  road  and  one  of  the  principal  creditors 
of  the  Wood-Galloway  Company.  On  the  trial  there  was  evi- 
dence to  show  that  on  July  13.  1907,  Turner  Wright,  intestate 
of  plaintiff,  an  engineer,  while  operating  an  engine  in  one  of 


75  Somerset  Ry.  v.  Pierce,  98 
Me.  528,  57  Atl.  888;  Woddrop 
V.  Weed,  154  Pa.  307,  26  Atl.  375; 
Bailie  v.  Caroline  Interstate 
Bid.  &  Loan  Assn.,  100  Ga.  20, 
28   S.  E.   274. 

76  Ranzau  v.  Davis,  85  Ore. 
26,  165  Pac.  1180;  Laiighlin  v. 
Page,  108  Me.  307,  80  Atl.  753. 

77  Bay  Biscayne  Co.  v.  Baile, 
73   Fla.  1120,  75   So.   860;    West 


Texas  Bank  &  Trust  Co.  v.  Mat- 
lock (Tex.),  212  S.  W.  937; 
Wilder  v.  Hart  (Ky.),  96  S.  W. 
1106. 

78  0gden  V.  Allen,  225  Mass. 
595,  114  N.  E.  862;  Catt  v.  Wm. 
Knabe  &  Co.,  93  Va.  736,  26  S.  E. 
246;  Gisborn  v.  Charter  Oak  Ins. 
Co.,  12  Sup.  Ct.  277. 

79  151  N.  C.  529,  66  S.  E.  588,  19 
A.  M.  Case  384. 


Trust  Property.  83 

[WRIGHT   V.   CANEY   RIVER  RY.   CO.] 

defendant's  trains,  was  killed  by  the  giving  away  of  a  defective 
trestle  of  defendant  company's  road,  under  circumstances  in- 
dicating negligence  on  the  part  of  the  defendants.  The  de- 
fendants denied  that  the  trestle  was  negligently  constructed, 
claiming  that  it  was  caused  to  give  away  by  the  wrongful  con- 
duct of  two  boys  in  turning  a  stream  of  water  on  the  founda- 
tion of  the  trestle,  thus  constituting  an  intervening  negligence 
of  responsible  and  independent  agents  as  the  proximate  cause 
of  the  injury,  and  offered  evidence  in  support  of  these  allega- 
tions. 

The  defendants  contended  further,  that  in  any  event  the 
defendant,  C.  J.  Morrow,  trustee,  was  not  responsible  for  the 
wrong  in  his  official  capacity  as  trustee,  nor  could  the  trust 
funds  held  by  him  be  subjected  to  the  claim  of  plaintiff.  It 
further  appeared  that  by  virtue  of  an  attachment  issued,  there 
were  funds  of  the  company  in  the  control  and  custody  of  the 
court  available  for  satisfaction  of  the  claim  if  it  should  be 
declared  a  valid  charge  against  the  trust  estate.  Judgment  was 
for  the  plaintiff  in  the  lower  court,  and  the  action  was  sustained 
on  appeal. 

49 — Trust  Estate  in  Reference  to  Torts. 

The  facts  in  the  above  case  showed  that  the  defendant  com- 
pany was  organized  under  a  charter  conferring  the  power  of 
eminent  domain  and  the  privilege  of  constructing  tramways, 
railways,  etc.,  for  the  transportation  of  passengers  and  freight, 
including  logs,  lumber,  timber,  etc.,  and  while  its  chief  purpose 
was,  no  doubt,  to  exploit  certain  timber  lands  and  market  the 
timber  growing  thereon,  for  all  purposes  relevant  to  the  case, 
it  was  considered  and  held  as  a  "railroad,"  subject  to  the  regu- 
lations and  liabilities  affecting  such   companies,  including  the 


84  Trusts  for  Business  Purposes. 

[wright  v.  caney  river  ry.  co.] 

statute  known  as  the  fellow  servant  act.®°  From  this  it  fol- 
lowed that  the  defendant  railway  and  the  trustees  in  charge  and 
control  at  the  time  were  responsible  for  actionable  negligence 
done  in  the  operation  of  the  road  under  the  lease  and  in  the 
exercise  of  the  franchise. ^^  It  was  chiefly  urged  for  error 
that  the  defendant.  C.  J.  Morrow,  trustee,  had  been  held  liable 
in  his  official  capacity,  and  the  trust  fund  subjected  to  the  pay- 
ment of  this  claim ;  but  the  court  in  substance  said : 

"We  are  of  opinion  tliat  on  the  facts  presented  the  objection 
cannot  be  sustained.  It  is  true  as  a  general  rule  that  a  trust 
fund  cannot  be  subjected  to  legal  liability  by  reason  of  the 
torts  of  the  trustee  or  his  agents  and  employes ;  but  this  doc- 
trine ordinarily  exists  in  the  case  of  passive  trusts,  or  when 
active  in  those  instances  where  the  power  and  duties  of  the 
trustee  are  so  defined  and  restricted  by  the  law,  or  the  pro- 
visions of  the  instrument  under  which  he  acts,  that  the  prin- 
ciple of  imputed  responsibility  similar  to  that  which  obtains 
in  the  case  of  principal  and  agent  does  not  and  cannot  prevail. 
Thus,  in  McLean  v.  McLean,^*  and  several  cases  of  like  im- 
port cited  and  relied  upon  by  defendants,  it  was  held  that  a 
liability  arising  out  of  a  transaction  with  an  executor  or  ad- 
ministrator is  personal  in  its  nature,  and  will  not,  as  a  rule,  be 
considered  as  an  obligation  of  the  estate.  This  is  on  the  ground 
that  these  officers  act  under  power  conferred  by  the  law  for 
the  purpose  of  settlement  and  distribution  according  to  facts 
and  conditions  existent  at  the  time  of  the  death  of  the  de- 

SOPriv.    Laws    1897— p.    83,    c.  E.  184,  55  L.  R.  A.  784,  85  Am. 

56;    Hemphill    v.    Railway,    141  St.  Rep.  747;  Logan  v.  Railroad, 

N.  C.  487,  54  S.  B.  420.  116  N.  C.  940,  21  S.  E.  959;  Ay- 

81  Mabry  v.  Railway,  139  N.  C.  cock  v.  Railroad,  89  N.  C.  321. 
388,  52  S.  E.  124  citing  Harden  82  88  N.  C.  394. 

V.  Railroad,  129  N.  C.  354,  40  S. 


Trust  Property.  85 

[WRIGHT  V.   CANEY   RIVER  RY.   CO.] 

ceased,  and  the  power  to  charge  the  estate  or  create  h'abilities 
against    it    is    not    recognized,    unless    contained    in    the    will. 
Though  even  here  if  it  is  shown  that  an  obligation  has  been 
assumed  by  an  executor  for  the  protection  of  the  estate  and 
has  inured  to  its  benefit,  its  payment  will  usually  be  allowed  in 
an  account  with  the  distributees.     But  no  such  limitation  can 
be  allowed  on  the  facts  presented  here.     It  appears  that  the 
Wood-Galloway  Company,  a  corporation,  owners  of  large  tim- 
ber interests  in  the  counties  of  Mitchell  and  Yancey  and  else- 
where, and  also  of  large  amounts  of  lumber  placed  in  various 
yards  in  said  counties,  estimated  at  several  millions  of   feet, 
having  become  embarrassed,  on  the  7th  day  of  June,   1907. 
conveyed  the  same  to  C.  J.  Morrow,  trustee,  with  power  to 
haul  out  and  market  said  lumber  and  dispose  of   the  timber 
lands  and  other  property  conveyed,  and  distribute  the  proceeds 
amonsT  the  creditors  mentioned  and  described  in  the  deed ;  that 
on  the  5th  day  of  June,  1907,  two  days  before  the  date  of  the 
said  deed,  the  Wm.  Whitmer  &  Sons,   Incorporated,  one  of 
the  principal  creditors  of  the  Wood- Galloway  Company  and 
cestuis  que  trust  in  the  said  deed,  sublet  to  the  trustee  in  same 
the   railroad  company   for  carrying  out  the   purposes   of   the 
trust,  and  the  trustee  took  charge  of  the  road  and  was  using  and 
operating  the  same  in  hauling  out  the  lumber,  and  otherwise 
carrying  out  the  purposes  of  the  trust,  when  the  intestate  was 
killed.     Among  others,  the  instrument  contains  the   following 
provisions : 

50 — Provision  for  Trustee's  Duties. 

"For  the  purpose  of  carrying  this  trust  into  effect,  it  shall  be 
the  duty  of  C.  J.  Morrow,  trustee,  aforesaid,  after  giving  a 
bond  in  the  sum  of  fifteen  thousand  ($15,000.00)  Dollars,  with 


86  Trusts  for  Business  Purposes. 

[wright  v.  canex  river  ry.  co.] 

good  and  sufficient  security  to  be  approved  by  the  Unaka  Na- 
tional Bank  and  City  National  Bank  of  Johnson  City,  Ten- 
nessee, to  take  charge  at  once  of  all  said  property  for  the 
benefit  of  said  creditors,  to  take  an  invoice  of  the  whole  of 
said  property  as  early  as  practicable  and  as  convenient,  and 
to  furnish  a  copy  of  said  invoice  to  each  of  the  creditors  above 
named ;  to  deliver  immediately  said  lumber  on  sticks  in  piles  or 
other  conditions  on  board  the  cars  at  Huntdale,  North  Carolina, 
from  there  to  be  shipped  under  the  direction  of  \Vm.  Whit- 
mer  &  Sons,  Incorporated,  who  are  to  receive  5  per  cent,  com- 
mission on  entire  sale  of  lumber  and  trade  discount  2  per  cent, 
thirty  days  for  shipment,  the  said  trustee  making  copies,  one 
of  which  shall  be  preserved  by  said  trustee,  one  to  be  for- 
warded to  the  said  Whitmer  &  Sons,  Incorporated,  and  the 
third  to  be  deposited  in  the  Unaka  National  Bank  of  Johnson 
City,  Tennessee,  for  the  use  and  benefit  of  the  said  creditors 
hereinabove  named,  and  further  copies  to  each  of  the  other 
creditors  above  named. 

It  shall  be  the  duty  of  the  trustee  aforesaid  to  make  an  esti- 
mate of  the  quantity  and  value  of  all  the  standing  timlier  or 
timber  remaining  uncut  of  every  character  and  description  and 
to  furnish  a  copy  of  said  estimate  to  Wm.  Whitmer  &  Sons, 
Incorporated,  and  deposit  one  copy  with  the  Unaka  National 
Bank  of  Johnson  City,  Tenn.  and  each  of  the  above  creditors 
above  named  for  the  use  and  benefit  of  the  creditors  hereinbe- 
fore named,  and  retain  a  copy  of  same  in  his  own  offices  which 
shall  be  subject  to  the  inspection  and  examination  by  said  cred- 
itors at  any  and  all  times,  to  be  done  at  as  early  a  date  as  prac- 
ticable and  convenient,  to  sell  all  the  said  standing  timber  re- 
maining uncut  for  cash  to  the  best  advantage  to  all  the  parties 
therein  concerned ;  and  to  make  sale  and  disposition  of  the 
aforesaid  timber  it  shall  be  the  duty  of  the  trustee  aforesaid. 


Trust  Property.  87 

[wright  v.  caney  ri\^r  ry.  co.] 

before  any  offer  for  said  timber  shall  be  accepted,  to  submit  the 
price  in  writing  to  the  creditors  hereinbefore  named ;  that  the 
said  trustee  shall  make  monthly  statement  of  the  amount  re- 
alized from  the  sale  of  said  lumber  and  timber  on  or  before 
the  first  day  of  each  month,  and  he  shall  at  no  time  retain  in  his 
possession    or    control    a    sum    greater    than    five    thousand 
($5,000.00)  Dollars  of  the  proceeds  of  said  sale ;  but  he  shall 
at  all  times  deposit  and  keep  on  deposit  at  the  Unaka  National 
Bank  of  Johnson  City,  Tennessee,  proceeds  of  said  sale  of  the 
said  timber  and  lumber,  and  shall  distribute  and  prorate  the 
money  arising  from  said  sale  among  the  creditors  herein  named, 
less  the  expense  of  handling  the  same  and  the  operating  ex- 
penses of  the  Caney  River  Railway  Company,  which  he  may 
deduct  from  any  moneys  in  his  hands,  furnishing  an  itemized 
statement  on  or  before  the  first  of  each  month  of  all  expenses 
in  conducting  the  said  operation,  and  whenever  he  shall  have 
on  hand  a  sum  equal  to  five  thousand  ($5,000.00)   dollars,  the 
same  shall  be  distributed  among  the  creditors  herein  named  by 
prorating  the  amount  according  to  the  respective  amounts  due 
and  owing  each  of  the  creditors  above  named.    The  said  trustee 
shall  receive  as  a  salary  the  sum  of  ($125.00)  per  month  and 
his  expenses  from  the  time  he  enters  upon  his  duty  and  until 
he  discharges  his  trust,  the  same  to  be  deducted  and  retained 
monthly  in  his  monthly  statement  of  expense.     It  is   further 
understood  and  agreed  between  the  Wood-Galloway  Company 
and  the  bank  creditors  above  named,  that  the   said  creditors 
shall  have  the  right  and  it  shall  be  their  duty  to  furnish  a  com- 
petent inspector  to  inspect  said  lumber  whose  duty  it  shall  be 
to  inspect  and  grade  all  such  lumber,  observing  the  rules  pre- 
scribed by  the  National  Hardwood  Lumber  Association,  and 
the  books  and  records  of  said  parties  concerned,  their  agents 
or  representatives,  to  this  transaction." 


88  Trusts  for  Business  Purposes. 

[WRIGHT   V.   CANEY  Bn'EB  RY.   CO.] 

51 — Trustee  Liable  in  His  Official  Capacity. 

It  will  thus  be  seen  that  under  a  lease  to  him  in  his  capacity 
as  trustee  and  under  the  powers  contained  in  this  deed  inter 
partes,  the  defendant,  C.  J.  Morrow,  in  the  use  and  operation  of 
the  railroad,  was  acting  throughout  with  the  sanction  and  for  the 
benefit  of  the  creditors,  the  cestuis  que  trust,  and  to  a  large 
extent  under  their  supervision  and  control,  and  should  be  held 
responsible  certainly  to  the  extent  of  the  property  conveyed  and 
in  evidence  for  both  the  contracts  and  torts  of  their  trustee, 
made  and  committed  within  the  scope  of  his  powers  and  in 
furtherance  of  their  interests.^^  Not  only  is  this  true  under 
the  general  principles  of  imputed  responsibility  indicated  in 
these  cases,  but,  on  authority  more  directly  apposite,  the  de- 
fendant Morrow  should  be  held  liable  in  his  official  capacity. 
Thus,  in  Mersey  Docks  Board  v.  Gibbs,  Lord  Westbury  lays 
down  the  proposition  that  trustees  may  render  the  property  of 
their  beneficiaries  liable  to  third  persons  for  an  act  done  by 
them  in  the  exercise  of  their  trust;  and  in  Bennett  v.  Wynd- 
ham,  De  Gex,  Fisher  &  Jones,  vol.  4,  p.  359,  it  was  held  that 
trustees  should  be  indemnified  out  of  the  trust  estate  by  reason 
of  a  recovery  had  against  them  for  negligence  of  employes  in 
carrying  out  an  order  given  in  the  management  of  the  estate. 
Applying  the  same  principle  in  the  case  of  Miller,  Trustee  v. 
Smythe,^*  the  court  held  that  where  a  trustee  legally  and  right- 
fully assumes  in  his  representative  capacity  the  relation  of 
landlord,  he  is  liable,  in  that  capacity,  to  answer  to  the  tenant 
for  the  violation  of  any  duty  which  the  general  law  attaches  as 
an   incident  to  that   relation.     Accordingly,   where  a  trustee, 

83  Sawyer  v.  Railroad,    142   N.      139  N.  C.  347,  51  S.  E.  1015,  70 
C.  1,   54   S.  E.  793,  115  Am.   St.      L.  R.  A.  738. 
Rep.    716;    Jackson   v.   Tel.    Co.,  84  92  Ga.  154,  18  S.  E.  46. 


Trust  Property.  89 

[WRIGHT   V.   CANEY  RIVER  RY.    CO.] 

duly  authorized,  rents  a  store  belonging  to  the  trust  estate,  and 
in  the  contract  of  rental  agrees  to  keep  the  shelving  in  the 
store  in  thorough  order  and  repair,  the  trust  estate  is  liable 
for  damages  occasioned  by  his  failure  so  to  do.  A  ruling  sub- 
stantially similar  has  been  made  by  our  own  court  in  Cheatham 
V.  Rowland. ^^  In  that  case  it  was  held  that  the  trust  fund 
could  be  subject  to  a  liability  created  by  the  trustees  in  the 
performance  of  their  duty  concerning  the  trust  property,  and 
that  the  trustee  only  was  required  to  be  made  a  party  in  order 
to  afford  appropriate  relief. 

The  cases  cited  and  relied  upon  by  counsel  for  defendant,  or 
some  of  them,  seem  to  have  proceeded  on  the  principle  that  the 
acts  of  tne  trustees  by  which  a  liability  was  sought  to  be  im- 
posed upon  the  trust  estate  were  not  within  the  scope  of  the 
powers  contemplated  and  conferred  by  the  deed,  or  they  were 
cases  where  the  estate  and  the  entire  dominion  over  it  for  the 
purpose  of  the  trust  were  placed  in  the  trust ee^  and  the  bene- 
ficiaries had  no  right  of  interference  and  control  in  its  man- 
agement. In  Parmenter  v.  Barstow,  et  al..  Trustees,  plaintiff 
passing  along  the  highway  had  her  eye  injured  by  chips  and 
pieces  of  stone  flying  in  her  face,  and  attributed  it  to  the  negli- 
gence of  defendant's  agents  and  servants  engaged  in  cutting  and 
chiseling  stone  on  the  premises.  The  facts  of  this  case  are  not 
given  with  sufficient  fullness  to  enable  us  to  consider  it  satis- 
factorily in  reference  to  the  question  presented  here ;  but  it  does 
not  appear  in  any  report  of  the  case  to  which  we  have  access 
that  the  trustees  were  occupying  the  premises  or  carrying  on 
the  business  indicated  in  furtherance  of  the  trust,  or  that  the 
beneficiaries  had  any  direct  interest  in  or  control  over  it  of 
any  kind.     So  in  Falardeau  v.  Boston  Art  Students'  Associa- 

85  22  R.  I.  245,  47  Atl.  365,  63   L.  R.  A.   227. 


90  Trusts  for  Business  Purposes. 

[wright  v.  caney  ri\nbb  by.  co.] 

tion,^'^  the  entire  interest  in  a  lease  on  a  building  was  assigned 
to  trustees  for  the  remainder  of  the  term,  and  responsibility  of 
the  corporation,  the  assignor,  for  negligence  of  the  employes 
and  servants  of  the  trustees  in  the  management  of  the  building 
was  denied,  because  it  appeared  that  the  trustee  had  the  entire 
and  exclusive  control  of  the  property,  and  the  employes  could 
in  no  sense  be  considered  the  agents  of  the  corporation. 

But  in  our  case,  the  beneficiaries  were  parties  to  the  deed. 
The  operation  of  the  road  for  their  benefit  was  clearly  contem- 
plated, its  expenses  provided  for,  and  they  were  expressly 
given  the  right  of  interference  and  control  in  the  main  pur- 
pose of  the  trust,  to  wit,  the  disposition  of  the  lumber,  etc. 
Other  decisions  apparently  adverse  were  rendered  on  the 
ground  that  the  claim  was  asserted  in  a  court  of  law,  and  a  re- 
covery could  not  be  made  efifective  without  threatening  the  in- 
tegrity of  the  trust  fund  and  the  entire  frustration  of  its  pri- 
mary purposes ;  but  no  such  objection  can  obtain  here  in  a 
court  having  full  jurisdiction  of  legal  and  equitable  issues  and 
where  a  part  of  the  trust  fund  is  in  the  control  and  custody  of 
the  court  and  available  in  satisfaction  of  the  claim. 

52 — Liability  May  be  Limited  by  Stipulation. 

We  must  not  be  understood  as  questioning  in  any  way  the 
position  upheld  in  Taylor  v.  3iIayo,^^  to  the  effect  that  a  trustee 
is  personally  bound  for  his  contract  or  acts  done  in  the  manage- 
ment of  the  estate,  unless  it  is  otherwise  expressly  or  clearly 
stipulated.  In  ISIitchell  v.  Whitlock,  supra,  the  principle  re- 
ferred to  is  thus  stated:     'A  trustee  purchasing  goods  or  in- 

87  182  Mass.  405,  65  N.  E.  797.      Whitlock,  121  N.  C.  166,  28  S.  E. 

88  110  U.  S.  330,  4  Sup.  Ct.  147,       292. 
28    L.    Ed.    163    and    Mitchell    v. 


Trust  Property.  91 

[wright  v.  caney  river  ry.  co.] 

curring  any  other  liability  is  personally  liable  for  the  payment 
thereof,  unless  his  liabiHty  is  limited  by  an  agreement  expressed 
or  implied  with  the  creditor.'  In  Taylor's  Case,  supra,  it  ap- 
peared that  Charles  Davis,  a  retiring  trustee,  having  a  claim 
for  fees  and  expenses  giving  him  a  lien  on  the  trust  assets, 
turned  over  the  fund  to  his  successors  who  gave  him  their  writ- 
ten obligation  signed  as  trustees,  that  they  v/ould  apply  the 
funds  of  the  estate  in  payment  of  his  claim  as  they  came  to 
hand.  The  estate  having  become  insolvent  and  the  assets  ex- 
hausted, in  suit  by  the  administratrix  of  Davis,  the  trustees 
were  held  individually  liable,  and  the  principle  was  declared : 
'That  if  a  trustee  contracting  for  the  benefit  of  tlie  trust  wants 
to  protect  himself  from  individual  liability  in  the  contract,  he 
must  stipulate  that  he  is  not  to  be  personally  responsible,  but 
that  the  other  party  is  to  look  solely  to  the  estate.'  But  in 
neither  of  these  cases  was  it  held  that  the  trust  estate  could 
not  also  be  held  responsible  to  the  creditor,  or  that  the  defend- 
ants, the  succeeding  trustees,  on  payment  of  the  demand,  could 
not  be  reimbursed  from  the  funds  of  the  estate  if  there  had 
been  such  funds  available  for  the  purpose.  In  the  present  case, 
no  doubt,  the  defendant  Morrow  could  have  been  sued  and  held 
liable  as  an  individual,  because  the  intestate  was  one  of  his 
employes ;  but  responsibility  also  attaches  to  the  trust  estate, 
and  will  be  imputed  to  the  beneficiaries  who  are  parties  to  the 
deed  and  were  allowed  and  took  part  in  its  actual  management 
and  control.  There  is  no  reversible  error  shown  and  the  judg- 
ment below  is  affirmed." 

WTiere  trustees  are  given  power  under  a  deed  of  trust  to 
conduct  a  business  as  if  they  were  the  absolute  owners  of  the 
trust  property;  and  the  deed  provides  that  no  responsibility 
whatever  shall  result  to  the  trustees  by  reason  of  mis-conduct 
of  agent  or  employes  and  no  liability  shall  attach  to  them,  the 


92  Trusts  for  Business  Purposes. 

estate  and  not  the  trustees  is  liable  for  a  negligent  act  of  em- 
ployes or  agents  of  the  trust.^^ 

53 — Not  Liable  for  Trustees'  Private  Debts. 

Trust  property  cannot  be  sold  on  execution  for  the  payment 
of  the  debts  of  the  trustee  in  his  individual  capacity ;  judgments 
against  such  trustee  are  not  liens  upon  the  trust  property  ;^° 
nor  can  a  valid  judgment  be  rendered  against  trustees  in  their 
representative  capacity  on  an  obligation  not  incurred  by  them 
in  such  capacity.^^ 

54 — Distribution. 

The  trust  instrument  should  provide  that  the  trustees  dis- 
tribute the  profits  and  dividends  to  the  beneficiaries  from  time 
to  time  as  the  trust  estate  may  warrant.  The  trustees  may 
not  anticipate  the  time  for  the  distribution  of  the  trust  fund  or 
property  itself ;  and  they  may  not  distribute  the  trust  fund  or 
property  prior  to  the  time  stated  in  the  trust  deed  without  first 
filing  a  petition  in  a  court  of  chancery  asking  approval,  and 
upon  proper  orders  being  entered  they  may  pro-rate  the  trust 
funds  among  the  shareholders.^^ 

55 — Shareholders  Interest — Personalty. 

The  beneficial  interest  one  may  have  in  a  trust  is  evidenced 
by  certificates  of  interest  or  shares,  whether  this  interest  is 
personal  property  or  real  estate  depends  in  a  measure  on  the 
language  of  the  trust  and  to  what  extent  the  trust  property  is 

89  Prinz  V.  Lucas,  210  Pa.  620,  92  Cliapin,  Petitioner,  148 
60  Atl.  309.  588,  20  N.  E.  195,  2  L.  R.  A.  768, 

90  Wright  V.  Franklin  Bank,  26  R.  C.  L.  1377.  See  Simmons 
59  Ohio  80,  51  N.  E.  876.  Hardware  Co.  v.  Warbel,  1  S.  D. 

91  Frost  V.  Thompson,  219  488,  47  N.  W.  814,  36  A.  S.  R. 
Mass.  360,  106  N.  E.  1009.  755,  11  L.  R.  A.  267. 


Trust  Property.  93 

to  be  controlled  by  the  beneficiaries.  The  rule  is  tliat  where 
the  power  to  manage  and  control  the  trust  property  which  is 
real  estate  is  in  the  beneficiaries,  and  the  trustees  are  subject  to 
their  will,  then  a  partnership  is  created  and  in  that  case  benefi- 
cial interests  may  be  deemed  realty.  In  addition  to  the  trustees' 
being  clothed  with  complete  jurisdiction  over  trust  property,  a 
provision  in  the  declaration  of  trust  should  specifically  declare 
that  certificates  of  interest  are  personal  property  for  all  pur- 
poses, and  not  real  estate.  This  principle  that  beneficial  interests 
are  personal  property  is  definitely  stated  in  the  case  of  In  Re 
Pittsburg  Wagon  Works'  Estate.®^  Here  a  portion  of  the 
stockholders  of  the  Pittsburg  Wagon  Works  created  a  trust  for 
the  purpose  of  buying  in  a  mortgage  of  the  corporation.  The 
trust  bought  the  mortgage  and  then  foreclosed ;  W.  J.  Kountz, 
as  trustee,  took  title  to  the  property  on  foreclosure  sale ;  at  his 
death  his  wife  claimed  an  interest  in  this  real  estate.  The  facts 
as  taken  from  the  reports  are  as  follows : 

W.  J.  Kountz  and  some  other  stockholders  of  the  Pittsburg 
Wagon  Works,  a  corporation  engaged  in  the  manufacture  of 
wagons  and  agricultural  implements,  formed  themselves  into  an 
association  with  a  capital  stock  of  $30,000  for  the  purpose  of 
purchasing  a  claim  against  the  corporation  amounting  to  $37,- 
500.  This  claim  was  a  mortgage  held  by  John  R.  ]\lcCune  and 
others.  On  October  30,  1883  the  association  adopted  by-laws 
the  first  section  of  which  provides  that  "this  company  shall  be 
called  the  'Pittsburg  Wagon  Works  Association.'  The  capital 
stock  shall  consist  of  $30,650  and  shall  be  divided  into  613 
shares  of  the  par  value  of  $50.  each."  The  by-laws  further 
provided  that  "the  legal  right  to  all  property  of  this  company 
shall  be  held  by  one  person,"  and  that  the  title  should  be  for  the 

93  204  Pa.  432,  54  Atl.  316. 


94  Trusts  i-or  Business  Purposes. 

FIX    RE    PITTSBURG    WAGON    WORKS.] 

time  being  in  his  own  proper  name,  with  the  addition  thereto 
of  'trustee  of  the  Pittsburg  Wagon  Works  Association,'  in 
trust  for  the  use,  benefit,  and  behoof  of  the  company.  A 
two-thirds  vote  of  the  shares  of  the  stockholders  was  necessary 
to  authorize  the  trustee  to  sell,  assign,  transfer,  or  incumber  the 
property.  Section  3  further  provided  as  follows :  "The  stock 
shares  and  interest  of  and  in  this  company  shall  be  assignable 
and  transferable  by  the  holder  thereof  in  person  or  by 
attorney  only  on  the  iDOoks  of  this  company,  which  books  the 
secretary  shall  cause  to  be  kept,  showing  the  names  of  stock- 
holders and  the  respective  amount  of  stock  held  by  each — in 
the  presence  of  the  president  or  secretary — and  upon  such 
transfer  the  assignee  of  such  share  or  shares  shall  thereby  as 
to  such  share  or  sliares  succeed  and  become  subject  to  all  the 
rights  and  obligations  of  an  original  party  thereto." 

The  association  purchased  the  mortgage  against  the  real  es- 
tate of  the  Pittsburg  Wagon  Works,  and  by  proceedings  there- 
on sold  the  same  at  sherifif's  sale  in  March,  1880,  the  associa- 
tion becoming  the  purchaser,  and  the  title  being  taken  in  the 
name  of  the  trustee.  By  virtue  of  an  execution  issued  on  a 
judgment  against  W.  J.  Kountz,  his  interest  in  said  real  estate 
was  sold  on  November  30,  1883  and  Peninah  W.  Kountz,  the 
appellant's  testator,  became  the  owner.  It  was  claimed  that 
the  mortgaged  premises  were  held  by  the  association  as  real 
estate  and  that  W.  J.  Kountz's  interest  therein  passed  to  Mrs. 
Kountz  by  virtue  of  the  levy  and  sale  on  the  execution.  The 
appellant  therefore  contended  that  he  was  entitled  to  the  in- 
terest of  W^  J.  Kountz  in  the  association — being  230  shares  of 
the  capital  stock  thereof — ^and  to  that  extent  to  participate  in 
the  proceeds  of  this  real  estate  sold  by  the  trustee  under  the 
Price  Act.    The  court  in  passing  on  this  question  said : 

"The  learned  auditor  and  court  below  correctly  held  that  the 


Trust  Property.  95 

[IN    BE    PITTSBURG    WAGON    WORKS.] 

interest  of  W.  J.  Kountz  was  personalty  and  not  real  estate,  and 
tliat  the  levy  on  the  execution  created  no  lien  on  the  real  estate 
held  by  the  association  and  that  the  sale  by  the  sheriff  vested 
no  interest  in  the  real  estate  in  Mrs.  Kountz.  The  association 
w^as  formed  for  the  purpose  of  purchasing  the  mortgage 
against  the  Pittsburg  Wagon  Works.  Having  secured  the 
mortgage,  the  association  was  compelled  to  enforce  the  pay- 
ment of  it  l)y  a  sale  and  purchase  of  the  real  estate.  The  by- 
laws adopted  October  30,  1883,  fixed  the  character  of  the  real 
estate  held  by  the  association.  As  we  have  seen,  they  require 
the  title  of  the  association's  property  to  be  in  the  name  of  the 
trustee,  and  not  in  the  names  of  the  individual  members.  The 
interest  of  any  member  is  determined  by  the  number  of  shares 
he  holds  in  the  capital  stock  of  the  company.  He  could  only 
dispose  of  his  interest  by  transferring  on  the  books  of  the 
company,  in  the  presence  of  the  president  or  secretary,  his 
shares  of  stock  to  the  purchaser  who  should  'thereby  as  to  such 
share  or  shares  succeed  and  become  subject  to  all  the  rights  and 
obligations  of  an  original  party  thereto.'  Such  was  the  nature 
and  character  of  the  interest  of  W.  J.  Kountz  in  the  Pittsburg 
Wagon  Works  Association  in  November,  1883  and  it  is  clear 
that  it  was  not  subject  to  levy  and  sale  as  real  estate." 

There  was  another  question  as  to  sixty-five  shares  of  the 
trust  which  the  court  disposed  of  as  follows :  "The  auditor 
and  court  below  awarded  the  Spiking  and  Chadwick  interests 
(65  sliares)  in  the  association  to  the  appellant,  but  he  com- 
plains in  his  first  assignment  that  the  auditor  erred  in  finding 
'that  it  has  been  shown  by  clear  and  satisfactory  evidence  that 
Mrs.  Peninah  W.  Kountz  had,  at  the  time  of  the  purchase  from 
W.  D.  Spiking,  or  at  the  time  of  the  purchase  from  Joseph 
Chadwick,  a  separate  estate  out  of  which  she  made  said  pur- 
chases or  any  of  them.'     This  finding  becomes  immaterial  in 


96  Trusts  for  Business  Purposes. 

[IN    RE    PITTSBURG    WAGON    WORKS.] 

view  of  the  fact  that  we  have  this  day  quashed  the  appeal  at 
No.  183,  October  term,  1902  which  assailed  the  correctness  of 
the  auditor  iti  holding  that  appellant  was  entitled  to  their  in- 
terests in  the  association. 

We  have  held  that  Mrs.  Kountz  took  no  title  to  W.  J. 
Kountz's  interest  in  the  real  estate  of  the  association  or  in  the 
association  itself  by  virtue  of  the  sheriff's  sale,  and  it  follows 
that  she  has  no  standing  to  contest  the  right  to  said  interest  in 
the  association  of  John  Phillips,  trustee  of  the  Alanchester  Sav- 
ings Bank,  to  whom  it  was  awarded  by  the  auditor.  She,  hav- 
ing no  right  to  the  interest,  is  not  in  a  position  to  question  the 
disposition  of  it  by  the  auditor,  and  hence  the  sixth  assignment 
of  error  cannot  be  sustained." 

A  certain  sum  of  money  was  allowed  as  commission  and 
another  amount  for  professional  services.  The  validity  of 
these  sums  was  put  in  question  and  in  disposing  of  them  and 
making  distribution  of  the  interest  money  which  was  on  hand, 
the  court  said :  "Under  the  testimony  in  the  case,  we  are  not 
convinced  that  there  was  error  in  allowing  the  credits  claimed 
by  the  accountant  for  commission  and  for  professional  servicer. 
The  interest  which  has  accrued  on  the  fund  for  distribution 
should  be  distributed  in  proportion  to  the  shares  in  the  associa- 
tion held  by  the  respective  claimants." 

56 — Shareholders  Interest — Real  Estate. 

Certificates  representing  interests  in  a  trust  are  treated  as  real 
estate  where  the  beneficiaries  have  control  by  reason  of  their 
power  to  elect  the  trustees,  or  where  the  trustees  are  merely 
their  agents  who  carry  out  the  business  policy  as  outlined  and 
dictated  by  the  beneficiaries.  In  the  case  following,  the  court 
draws  the  distinction  and  shows  the  reason  for  beneficial  interest 


Trust  Property.  97 

[PRIESTLEY    V.    BURRILL,.] 

in  one  trust  being  personal  property,  and  in  the  other  real  es- 
tate. In  the  case  of  Priestley  v.  Burrill,^*  three  trusts  were 
involved  in  one  suit :  Hoinan's  Real  Estate  Trust,  Boston  Real 
Estate  Trust,  and  Warren  Chambers  Trust.^^  The  Supreme 
Court  of  IMassachusetts  decided,  in  reference  to  the  question 
on  taxation,  that  in  two  of  the  trusts  the  shares  were  personalty 
and  in  the  third,  the  shares  were  real  estate ;  this  decision  was 
based  on  the  power  given  the  beneficiaries  in  the  di  liferent 
trusts.  In  two  of  them  the  trustees  were  given  absolute  control 
of  their  own  actions  and  no  power  was  given  the  sharpholders 
to  elect  trustees.  In  the  third — where  the  court  held  that  the 
beneficial  interests  were  subject  to  a  real  estate  tax — the  share- 
holders had  the  power  to  elect  the  trustees.  The  facts  may  be 
gathered  from  the  decision  which  in  general  is  as  follows : 

Charles  Plomans  Priestley  died  on  September  4,  19 16,  domi- 
ciled in  England.  The  petitioner,  who  was  the  ancillary  execu- 
tor of  his  will,  brought  a  petition  to  determine  whether  certain 
shares  in  trusts  of  Massachusetts  real  estate  were  subject  to  a 
legacy  and  succession  tax.  The  court  said:  "Undoubtedly 
these  shares  constitute  property  within  the  jurisdiction  of  the 
commonwealth,  and  would  have  been  taxable  to  nonresidents 
before  the  enactment  of  St.  19 12,  c.  678,^^  that  statute,  con- 
tinued by  St.  19 1 6,  c.  268,  Section  i,  confined  the  tax  in  case 
of  nonresident  decedents  to  real  estate  within  the  common- 
wealth or  any  interest  therein.  If  the  shares  owned  by  this 
nonresident  decedent  constitute  real  estate  or  an  interest  there- 
in, they  are  taxable,  but  not  otherwise. 

In  the  recent  case  of  Dana  v.  Treasurer  and  Receiver  Gen- 

94  230  Mass.  452,  120  N.  E.  100.  96  Peabody    v.    Treasurer    and 

95  Copies  of  these  three  trust  Receiver  General,  215  Mass.  129, 
instruments  are  to  be  found   in       102  N.  E.  435. 

the  Appendix. 


98  Trusts  for  Business  Purposes. 

[PRIESTI.EY    V.    BURRIl.L.] 

eral,^'''  the  question  arose  whether  similar  shares  in  the  Amos- 
keag  Manufacturing  Company  and  the  Boston  Ground  Rent 
Trust,  two  real  estate  trusts,  were  real  or  personal  estate  or 
partly  each.  The  beneficial  interest  in  the  trust  was  divided  into 
transferable  shares ;  the  real  estate  and  personal  property  con- 
stituted one  trust  fund,  and  it  was  expressly  provided  that  at 
the  termination  of  the  trust  the  trustees  should  liquidate  the  as- 
sets and  distribute  the  same  among-  the  shareholders,  but  there 
was  no  provision  authorizing  the  trustees  to  divide  the  real 
property  among  them.  It  was  held  that  the  real  estate  was  to 
be  considered  as  converted  into  personal  estate  from  the  begin- 
ning, and  that  consequently  the  shares  were  personal  property. 
In  the  case  just  cited  the  court  held  that  the  beneficial  inter- 
est in  the  trust  was  personalty  for  the  reason  that  the  share- 
holders could  not  control  the  actions  of  the  trustees ;  and  for 
the  further  reason  that  in  construing  the  trust,  the  trustees  had 
the  power  to  dispose  of  the  property  and  pro-rate  the  proceeds 
among  the  shareholders.  In  Homans  Real  Estate  Trust  there 
is  a  provision  that  the  trustees  shall  liave  entire  control  and 
management  of  the  trust  property  and  in  case  one  of  the  trus- 
tees ceases  to  be  a  trustee  before  the  termination  of  the  trust, 
his  successor  shall  be  appointed  by  the  Old  Colony  Trust  Com- 
pany. This  last  provision  clearly  excludes  the  beneficiaries 
from  controlling  the  trust  through  the  trustees.  The  Boston 
Real  Estate  Trust  provides  that  the  trustees  shall  have  absolute 
control  over  and  disposal  of  all  real  estate  held  by  them,  and 
in  case  of  any  vacancy  from  any  cause  at  any  time  in  the  num- 
ber of  said  trustees  the  vacancy  shall  be  filled  by  the  remaining 
trustees.  The  court,  in  comparing  these  two  trusts  with  the 
one  in  the  Dana  case,  said : 

97  Dane  v.   Treasurer  and   Re-      116  N.  E.  941. 
ceiver    General,    227    Mass.    562, 


Trust  Property.  99 

rPRIESTI.EY    V.    BURRILL.] 

"As  respects  the  shares  in  the  Homans  Real  Estate  Trust  and 
the  shares  in  the  Boston  Real  Estate  Trust,  the  present  case 
cannot  be  distinguished  in  principle  from  the  Dana  Case.  The 
essential  facts  are  similar,  and  the  general  scheme  of  each  of 
these  trusts  worked  a  conversion  of  all  the  property  of  the 
trust  into  personalty  as  one  fund  from  the  outset.  The  de- 
ceased testator  had  no  interest  in  the  real  estate  of  either  the 
Homans  Real  Estate  Trust  or  the  Boston  Real  Estate  Trust 
which  would  go  to  his  heirs,  but  an  interest  in  the  net  proceeds 
of  the  trust  fund  after  the  sale  of  all  the  property.  Indeed  the 
Homans  Real  Estate  Trust  agreement  expressly  provided  that 
shares  hereunder  shall  be  personal  property.  We  are  of  opin- 
ion that  these  shares  belonging  to  the  estate  of  a  nonresident 
and  not  constituting  any  interest  in  real  estate  are  not  subject 
to  a  succession  tax." 

At  this  juncture  the  court  takes  up  the  third  tntst  in  the 
suit  and  says  that  in  the  trust  agreement  of  the  Warren  Cham- 
bers Trust  there  is  no  such  imperative  requirement  that  the 
property  shall  be  sold  and  the  proceeds  distributed  among  the 
shareholders.  The  trustees  could  transfer  the  property  to  a 
corporation,  if  instructed  by  the  shareholders  to  organize  one; 
but  they  were  authorized  to  sell  the  property  at  the  expiration 
of  the  trust  only  in  default  of  action  relative  thereto  by  the 
shareholders.  This  means  the  shareholders  had  the  right  to 
dispose  of  the  property,  they  had  full  control,  and  the  trustees 
as  such  could  sell  only  upon  default  of  the  shareholders  to  act. 
The  court  found  the  trust  agreement  contained  no  provision 
that  the  shares  should  be  personal  property  as  to  title,  what- 
ever the  legal  effect  of  such  a  clause  might  be.  and  says :  "That 
tliere  was  no  equitable  conversion  of  this  real  property  into 
personalty  at  the  creation  of  the  trust,  or  at  the  death  of  the 
testator,  is  virtually  settled  by  the  decision  in  the  Dana  case 


100  Trusts  for  Business  Purposes. 

[PRIESTLEY    V.    BURRILL.] 

relating  to  the  Duluth  and  Gladstone  Real  Estate  Trust." 

The  Warren  Chambers  Agreement  and  Declaration  of  Trust 
provided  for  the  filling  of  a  vacancy  in  the  number  of  trustees 
by  the  trustees  until  the  next  annual  meeting  of  the  share- 
holders or  until  a  special  meeting  might  be  called  for  that  pur- 
pose. This  provision  expressly  placed  the  appointment  of  trus- 
tees in  the  shareholders,  it  gave  them  control  of  the  trust ;  this 
seems  to  be  one  of  the  determining  elements  as  to  whether  the 
instrument  creates  a  pure  trust  or  a  partnership.  In  comment- 
ing further  the  court  said : 

"This  trust  agreement^  in  our  opinion,  created  a  partnership 
relation  among  the  certificate  holders  as  distinguished  from  a 
pure  trust.  They  are  associated  together,  have  a  fixed  annual 
meeting,  and  special  meetings  upon  the  written  request  of  the 
holders  of  one-tenth  of  the  shares;  they  are  empowered  to  fill 
any  vacancy  existing  in  the  number  of  trustees,  and  may  re- 
move any  or  all  of  them  and  elect  others  in  their  place.  After 
the  erection  of  the  new  building,  the  trustees  can  incur  no  debt 
or  liability  except  such  as  may  be  incidental  to  the  management 
of  the  property  held  by  them,  and  then  only  for  an  amount  not 
exceeding  in  the  aggregate  at  any  one  time  ten  thousand  dol- 
lars ;  they  are  specially  authorized  to  mortgage  the  premises 
purchased  and  the  buildings  they  may  erect  thereon  for  a  speci- 
fied amount  but  not  for  a  larger  amount ;  and  no  sale  of  the 
real  estate  can  be  made  by  them  unless  authorized  by  vote  of 
the  shareholders.  In  short,  the  certificate  holders  are  associ- 
ated together,  they  control  the  property,  and  for  convenience 
have  placed  the  legal  title  to  it  in  trustees  as  their  managing 
agents.^^  Under  the  Massachusetts  rule,  while  partnership 
real  estate  is  personalty  so  far  as  necessary  to  pay  the  debts  of 

98  Williams      v.      Milton,      215  Mass.  1,  102  N.  E.  355. 


Trust  Property.  loi 

[PRIESTLEY    V.    BUBRILL.] 

the  firm,  it  is  real  property  for  all  other  purposes.  The  de- 
cedent, as  one  of  the  partners,  had  a  beneficial  or  equitable  in- 
terest in  the  real  estate  of  the  Warren  Chambers  Trust;  and 
however  that  interest  may  be  defined,  it  was  'real  estate  within 
the  Commonwealth  or  any  interest  therein,'  and  as  such  was 
subject  to  a  succession  tax  by  the  express  terms  of  St.  1909, 
c.  490,  part  4,  Sec.  i,  as  amended  by  St.  191 2,  c.  678,  and  St. 
1916,  c.  268.99 

In  summary,  the  court  held  that  the  beneficial  interest  in 
the  Homans  Real  Estate  Trust  and  the  Boston  Real  Estate 
Trust  was  personalty,  for  the  reason  that  in  these  trusts  the 
title  and  control  of  the  trust  property  was  in  the  trustees ;  in 
the  Warren  Chambers  Trust,  the  beneficial  interest  was  real 
estate,  for  the  reason  that  the  control  of  the  trust  and  trustees 
was  in  the  shareholders,  thereby  creating  a  partnership. 


99  Kinney  v.  Treasurer  and 
Receiver  General,  207  Mass.  368, 
93  N.  E.  586,  Ann.  Cas.  1912A, 
902,  35  L.  R.  A.  (N.  S.)  784; 
Kennedy  v.  Hodges,  215  Mass. 
112,  102  N.  E.  432;  Peabody  v. 
Treasurer    &    Receiver    General, 


215  Mass.  129-31,  102  N.  E.  435; 
Frost  V.  Thompson,  219  Mass. 
360,  106  N.  E.  1009;  Hawkridge 
V.  Treasurer  and  Receiver  Gen- 
eral, 223  Mass.  134,  111  N.  E. 
707. 


CHAPTER  V. 
CERTIFICATES— BENEFICIAL    INTERESTS— SHARES. 

57 — History. 

Transferable  sliares  in  unincorporated  companies,  joint- 
stock  associations,  and  partnerships  have  been  recognized  as 
vaHd  in  commerce  and  law  for  several  centuries  past.  As"t^e 
law  of  partnership  developed  and  general  and  special  partners 
became  more  common,  certificates  were  issued  to  show  the  in- 
terest and  the  nature  of  the  interest  in  the  partnership  business. 
The  issuing  of  a  certificate  became  a  ready  means  to  raise 
money  in  all  sorts  of  enterprise.  In  England,  during  the  early 
part  of  the  eighteenth  century,  a  great  number  of  frauds  were 
perpetrated  by  unscrupulous  schemers ;  companies  were  or- 
ganized for  the  development  of  the  wildest  flights  of  fancy;  all 
that  was  necessary  was  to  open  a  subscription  book,  spin  a 
pleasing  yam  around  the  proposed  enterprise,  and  the  money 
was  raised;  and  that  was  the  end  of  the  business.  To  put  a 
stop  to  these  chimerical  speculations  and  stock  gambling,  parlia- 
ment passed  what  was  known  as  the  Bubble  Act.  This  act 
had  the  desired  efi'ect  and  was  in  force  for  over  a  hundred 
years.  In  construing  this  act,  it  was  determined  that  it  was 
directed  against  those  companies  whose  purposes  were  mis- 
chievous, and  it  was  said  tliat  it  was  not  an  offense  at  common 
law  for  an  unincorporated  company  to  have  and  to  issue  trans- 
ferable shares. ^°® 

100  King  V.  Webb,  14  East  506;       Thompson    on    Business    Trusts, 

22. 

(102) 


Certificates — Beneficial  Interests — Shares.      103 

58 — English  Rule. 

It  was  well  established  from  a  very  early  date  in  England 
that  joint-stock  companies  might  issue  shares  as  a  matter  of 
right,  and  in  passing  on  this  particular  point  the  master  of  the 
rolls  said }  "1  have  listened  in  vain  for  any  case,  or  indeed, 
for  the  statement  of  any  principle,  whereby  at  common  law, 
and  independent  of  any  statute,  a  partnership  between  persons 
who  agree  among  themselves  that  their  shares  shall  be  legally 
assignable  in  perpetuum,  or  indefinitely  assignable,  is  absolutely 
void  and  illegal.  I  find  no  case  which  determines  it  and  no 
principle  upon  which  it  can  rest,  nor  am  I  able  to  conjecture 
why  such  an  association  should  be  void  at  common  law.  It 
does  not  appear  to  me  to  offend  against  society,  or  to  injure  any 
class  of  individuals,  and,  therefore,  unless  bound  by  distinct 
authority,  I  should  not  be  the  first  judge  to  hold  that  such  an 
association  was  void  at  common  law." 

59 — American  Rule. 

Trusts,  partnerships  and  unincorporated  associations  have  is- 
sued, without  question,  certificates  of  beneficial  interest  and 
share  certificates  from  the  ver}.-  inception  of  the  country.  The 
Supreme  Court  of  Illinois  recognized  the  right  of  a  trust  to 
divide  its  property  into  shares,*  for  the  Court  incorporated  a 
portion  of  the  trust  agreement  in  its  decision  when  it  says : 
"Article  4  fixed  the  amount  of  the  capital  stock  at  $100,000.00 
to  be  divided  into  1000  shares  of  $100.  each,  that  being  the  esti- 
mated cost  of  the  lands  owned  and  to  be  owned  by  the  Associa- 

1  In  re  Mexican  v.  S.  A.  Co.,  598,  35  N.  E.  246;  Venner  v.  Chi- 
27  Beav.  474,  6  L.  R.  A.  (N.  S.)  cago  City  Ry.  Co.,  258  III.  523, 
665.  101   N.  E.  949. 

2  Hart    V.    Seymoure,    147    111. 


104  Trusts  for  Business  Purposes. 

tion."  It  may  be  taken  as  firmly  established  that  the  privilege 
or  raising  and  issuing  transferable  shares  is  a  common  law 
right,  and  not  a  privilege  peculiar  to  corporations.'  The  lead- 
ing case  in  which  this  rule  is  set  forth  is  Phillips  v.  Blatchford  ;* 
the  facts  are  as  follows : 

On  or  about  June  i,  1874,  certain  persons  entered  into  a 
copartnership  styled  the  Ryder  Reciprocal  Grate  Association 
under  a  declaration  of  trust  by  the  terms  of  which  no  member, 
as  such,  was  to  have  any  control  over  the  business  of  the  asso- 
ciation which  was  to  be  entirely  under  the  control  of  a  board  of 
managers  of  whom  the  trustee  was  to  be  a  member,  and  the 
other  members  were  to  be  elected  by  the  shareholders.  The 
stock  was  to  be  divided  into  fifteen  hundred  sliares,  and  each 
holder  of  a  share  was  entitled  to  a  certificate  which  might  be 
transferred  by  an  assignment  in  writing.  The  following  pro- 
vision was  made  in  case  of  the  death  of  a  member :  'The  de- 
cease of  a  member  of  the  association  shall  not  work  a  dissolu- 
tion of  it,  nor  shall  it  entitle  his  legal  representatives  to  an 
account,  or  to  take  any  action  in  the  courts  or  otherwise  against 
the  association  or  the  trustee  for  such;  but  they  shall  simply 
succeed  to  the  right  of  the  deceased  to  the  certificate  and  the 
shares  it  represents,  subject  to  this  declaration  of  trust.' 

The  defendant's  testator  (Scudder)  became  the  owner  of 
one  hundred  and  twenty-five  shares  in  the  association  on  or 
about  June  i,  1874,  and  was  such  owner  at  the  time  of  his 
death  on  August  28,  1875.  On  October  11,  1875,  the  defendant 
and  John  P.  Putnam,  since  deceased,  were  appointed  executors 
of  his  will. 

8  Thompson-Business       Trusts,  4 137   Mass.   510. 

23;  Sears  Trust  Estate  (2d.  ed.) 
105. 


Certificates — Beneficial  Interests — Shares.      105 

[PHILLIPS   V.   BLATCHFORD.] 

The  association  in  the  prosecution  of  its  business  became  in- 
debted to  the  Taunton  Iron  Works  Company ;  this  indebtedness 
was  incurred  partly  before  and  partly  after  the  death  of  Scud- 
der.  On  June  18,  1878,  the  Taunton  Iron  Works  Company 
brought  an  action  against  the  plaintiff  and  other  members  of 
the  association,  to  recover  the  debt.  On  November  12,  1880, 
the  plaintiff  and  Sylvanus  N.  Staples  each  paid  one-half  of 
the  amount  of  said  claim,  which  amounted  in  the  whole  to  the 
sum  of  $6934.78.  The  association  also  became  indebted  in  the 
sum  of  $1625.27  to  the  firm  of  Staples  and  Phillips,  which  firm 
was  composed  of  the  plaintiff  and  Sylvanus  N.  Staples,  and  on 
February  28,  1879,  said  indebtedness  was  paid  by  the  plaintiff' 
by  the  account  being  charged  to  profit  and  loss  on  the  books  of 
the  firm. 

The  number  of  shares  in  the  association  held  by  solvent  per- 
sons in  Massachusetts  was  one  hundred  and  eighty-nine;  and 
on  November  12,  1880,  the  plaintiff  presented  a  petition  to  the 
Probate  Court,  setting  forth  the  payment  by  the  plaintiff  of  the 
claim  of  the  Taunton  Iron  Works  Company  and  the  liability 
of  Scudder  to  the  plaintiff  growing  out  of  such  payment;  the 
probate  court,  on  December  20,  1880,  ordered  the  executors  of 
the  will  of  said  Scudder  to  retain  in  their  hands  the  sum  of 
$4000  until  the  rendering  of  final  judgment  in  any  suit  at  law 
or  in  equity  commenced  within  one  year  after  payment  of  the 
claim.  The  prayer  of  the  bill  was  that  the  defendant  be  ordered 
to  pay  125/189  of  the  claims  paid  by  the  plaintiff,  and  for 
further  relief. 

The  answer  admitted  the  allegations  of  fact  contained  in  the 
bill;  alleged  that  the  bill  did  not  set  forth  any  ground  for  relief 
in  equity ;  and  that  the  causes  of  action  accrued  within  two 
years  from  the  date  of  the  defendant's  giving  bond  as  executor, 
or,  if  such  causes  of  action  accrued  after  two  years,  that  they 


io6  Trusts  for  Business  Purposes. 

[PHILLIPS   V.   BLATCHFORD.] 

accrued  more  tlian  one  year  before  the  commencement  of  the 
suit. 

The  case  was  heard  by  Field,  J.,  upon  the  bill  and  answer, 
and  reserved  for  the  consideration  of  the  full  court. 

60 — Partnership  Shares  Legal. 

Holmes,  J.  It  is  too  late  to  contend  that  partnerships  with 
transferable  shares  are  illegal  in  this  commonwealth.  They 
have  been  recognized  as  lawful  by  the  court,  from  Alvord  v. 
Smith, ^  to  Gleason  v.  McKay. ^ 

Even  if  the  question  were  a  new  one,  we  should  come  to  the 
same  result.  The  grounds  upon  which  they  were  formerly 
said  to  be  illegal  in  England,  apart  from  statute,  have  been 
abandoned  in  modern  times.''^ 

It  is  suggested  by  the  defendant  that  such  associations  are 
intended  to  avoid  having  a  paid-up  capital,  which  would  be  nec- 
essary if  a  corporation  were  formed,  and  to  escape  taxation. 
These  new  reasons  peculiar  to  this  State  derive  no  support 
from  the  English  decisions  invoked  and  do  not  impress  us.  If 
a  partnership  incurs  debts,  the  members  are  personally  liable, 
and  there  is  no  need  of  a  paid-up  capital.  And  an  association 
does  not  become  illegal  simply  because  another  very  like  it  is 
taxed.  We  perceive  no  wrong  to  the  public;  and  as  to  the 
shareholders,  if  they  choose  to  purchase  stock  in  a  partnership 
with  unlimited  personal  liability,  it  is  their  own  lookout.  Courts 
v/ill  not  assume  to  understand  the  interests  of  contracting  par- 
ties better  than  they  do  themselves. 

6  5  Pick.  232.  Heathorn,  6  Man.  &  G.  81,  140; 

6  134  Mass.  419.  In   re   Mexican   &   Soutti   Ameri- 

7Walburn  v.  Ingilby,  1  Myl.  &  can    Co.,    27    Beav.    474,    481,    4 

K.  61,  76;   Garrard  v.  Hardey,  5  DeG.  &  J.  320;  1  Lind.  Part.  (3d 

Man.     &    G.     471;    Harrison     v.  ed.)   200-202. 


Certificate's — Beneficial  Interests — Shares.      107 

EPHILLirS    V.    BLATCHFORD.] 

61 — Bubble  Act  not  Applicable  to  America. 

We  attach  equally  little  weight  to  the  argument  that  the 
Bubble  Act  (St.  6  Geo.  i  c.  18)  was  made  applicable  to  Amer- 
ica, in  1 74 1,  by  the  St.  of  14  Geo.  II.  c.  37,  by  which,  among 
other  things,  all  offenders  against  these  acts  were  subjected  to 
the  penalties  of  a  praemunire,  and  brokers  dealing  in  the  shares 
therein  referred  to  were  made  incapable  of  acting  as  brokers 
for  the  future. 

The  Constitution  continued  in  force,  until  altered  or  re- 
pealed, the  laws  which  had  been  adopted,  used,  and  approved 
in  the  Province,  Colony,  or  State,  and  usually  practised  on  in 
the  courts  of  law  (Mass.  Const,  c.  6,  art.  6),  and  it  may  be 
true  that  "some  few  English  statutes,  passed  since  the  emigra- 
tion, were  adopted  by  our  courts."^  But  the  fact  that,  as  far 
back  as  the  records  of  our  judicial  decisions  extend,  this  act 
has  not  been  practised  on  in  the  courts,  but  has  been  ignored 
by  them,  is  strong  evidence  that  the  act  was  not  among  those 
that  were  kept  in  force  after  the  Revolution.^  In  view  of  the 
practice  and  opinion  disclosed  in  these  cases,  it  is  not  necessary 
to  give  more  than  a  word  to  the  absurdity  of  attempting  to  en- 
force the  act  as  a  whole,  or  to  the  fact  that  the  whole  course 
of  our  legislation  shows  the  same  ignorance  of  its  existence  as 
the  decisions,  and  that  the  St.  of  1878,  c.  275,  clearly  assumes 
such  associations  to  be  lawful. 


8  Commonwealth  v.  Knowlton,  Mass.    525;    Taft    v.    Ward,    106 

2  Mass.  529,  534.  Mass.    518,    111   Mass.    518;    Gott 

9Alvord  V.  Smith,  5  Pick.  232;  v.  Dinsmore,  111  Mass.  45;    Bos- 

Tappan    v.    Bailey,    4    Met.    529,  ton  &  Albany  Railroad  v.  Pear- 

535;   Tyrrell  v.  Washburn,  6  Al-  son,    128    Mass.    445;    Gleason   v. 

len  466,  475;    Hoadley  v.  County  McKay,  134   Mass.  419;   Frost  v. 

Commissioners,    105    Mass.    519,  Walker,  60  Maine  468,  471. 
526;     Bodwell    v.    Eastman,    106 


io8  Trusts  for  Business  Purposes. 

[PHILLIPS   V.   BLATCHFORD.l 

62 — Beneficial  Interest  Passes  to  Legal  Representative  at  Death. 

It  is  admitted  that  the  partnership  was  formed  under  a  decla- 
ration of  trust,  by  which  it  was  provided,  among  other  things, 
as  follows :  'The  decease  of  a  member  of  the  association  shall 
not  work  a  dissolution  of  it,  nor  shall  it  entitle  his  legal  repre- 
sentatives to  an  account,  or  to  take  any  action  in  the  courts  or 
otherwise  against  the  association  or  the  trustee,  for  such;  but 
they  shall  simply  succeed  to  the  right  of  the  deceased  to  the 
certificate  and  the  shares  it  represents,  subject  to  this  declara- 
tion of  trust.' 

The  main  question  is  whether  this  provision  is  broad  enough 
to  make  the  estate  of  a  shareholder  liable  to  contribute  to  the 
other  partners  for  debts  incurred  after  his  decease,  and  before 
the  executor  has  done  any  act  by  which  he  becomes  a  partner 
in  the  testator's  place.  In  the  opinion  of  the  majority  of  the 
court,  the  provision  has  that  effect.  It  may  be  conceded  that 
without  some  act  on  his  part,  the  executor  would  not  become  a 
partner ;  and,  for  the  purposes  of  this  case,  it  may  also  be  con- 
ceded that  the  estate  in  the  executor's  hands  would  not  be  liable 
to  creditors  for  such  a  debt,  unless  the  executor  was  personally 
bound.  There  might  be  some  difficulty  in  showing  how  such  a 
new  contract  could  be  made  with  a  dead  man,  and  it  might  be 
said  that  our  law  does  not  recognize  an  estate  as  a  universitas 
able  to  contract,  or  know  any  way  of  binding  an  executor  other- 
wise than  personally  by  a  contract  made  after  the  testator's 
death.i" 

But  a  man  may  contract  with  his  copartners  to  indemnify 
them  for  a  certain  proportion  of  liabilities  incurred  after  his 
death ;  and,  if  such  liabilities  are  incurred,  his  executor  will  be 

10  Labouchere    v.    Tupper,    11      mere,  L.  R.  15  Eq.  134. 
Moore  P.  C.  198;   Owen  v.  Dela- 


Ce;rtificates — Beneficial  Interests — Shares.      109 

[PHILLIPS   V.   BLATCHFORD.] 

bound  de  bonis  testatoris  in  the  same  way  that  he  is  by  any 
other  contract  of  his  testator,  and  without  introducing  any 
analogous  principle  whatever. ^^ 

Ordinarily,  when  a  partner  contracts  that  his  share  in  the 
profits  shall  continue  to  a  certain  time,  he  contracts  by  im- 
plication that  his  liability  for  losses  shall  have  the  same  dura- 
tion. We  see  no  reason  why  this  principle  should  not  apply 
when  the  time  extends  beyond  the  partner's  life.  And  when, 
as  here,  a  company  is  purposely  made  as  nearly  a  corporation 
as  possible,  and  it  is  obviously  intended  tliat  the  death  of  a 
sliareholder  shall  not  affect  either  the  company  or  the  rights 
incident  to  the  share,  we  think  that  the  liabilities  go  with  the 
rights,  and  that  the  effect  of  the  testator's  contract  was  that  he 
would  sliare  losses  until  his  estate  was  reheved  of  his  shares 
in  the  stock. ^^ 

When  a  partner  merely  reserves  an  option  to  his  executor  to 
take  his  place  in  the  firm,  and  perhaps  even  when  he  covenants 
tliat  his  executor  shall  take  his  place,  but  does  no  more,  the 
interest  of  his  estate  in  the  profits  after  his  death  and  there- 
fore its  liability  for  losses  are  dependent  upon  the  executor's 
personal  participation  in  the  business;  so  that,  if  the  executor 
declines,  the  firm  will  be  dissolved  by  the  death,  and  an  account 
must  be  taken,  although  the  surviving  partner  may  be  entitled 
to  damages.^* 

63 — Profits  and  Losses  Follow  Certificates. 

But  the  present  contrivance  goes  farther,  and,  as  we  have 
said,  is  intended  to  imitate  a  corporation  so  far  as  to  stipulate 

11  Turquend  v.  Kirby,  L.  R.  4  12  In    re    Agriculturist    Cattle 

Eq.   123,  134.     See  Hammond   v.  Ins.  Co.,  L.  R.  5  Ch.  725. 

Grander,    128    Mass.    272;    Bacon  13  See     Downs     v.     Collins,     6 

V.  Pomeroy,   104   Mass.   577,  582.  Hare  418. 


no  Trusts  for  Business  Purposes. 

[PHILLIPS   V.   BLATCHFORD.l 

that  profits  and  losses  shall  follow  the  certificate,  and  that  the 
certificate  shall  remain  part  of  the  estate  of  the  deceased, 
whether  the  executor  makes  himself  a  member  of  the  company 
or  not.  'It  is  very  true  tliat  an  executor  cannot  become  an 
actual  partner  in  the  concern,  or  be  entitled  under  any  new 
contract  to  the  benefit  of  it,  unless  he  has  accepted  the  shares 
and  agreed  to  become  a  partner,  but  the  sliares  are  vested  in 
him  and  in  some  sense  he  is  a  sliareholder,  although  not  in  the 
complete  sense  so  as  to  be  liable  in  his  own  person  to  all  the 
subsequent  responsibility.'^* 

The  plaintiff's  cause  of  action,  in  respect  of  the  debt  of  the 
Grate  Association  to  the  Taunton  Iron  Works  Company,  ac- 
crued upon  payment.^^  We  do  not  gather  that  the  plaintiff 
had  either  the  duty  or  the  right  to  pay  this  debt  until  he  was 
sued,  and  see  no  ground  for  the  defendant's  plea  that  it  is 
barred.  On  the  other  hand,  the  claim  based  upon  the  debt  of 
the  association  to  the  plaintift"s  firm  is  without  foundation. 
The  debt  was  not  paid  by  being  charged  off  to  profit  and  loss 
on  the  books  of  the  firm,  even  if,  as  between  the  plaintiff  and 
his  partner,  it  was  converted  into  separate  assets  and  divided. 
There  is  no  need,  therefore,  to  consider  further  objections. 

Inasmuch  as  the  plaintiff  must  recover,  if  at  all,  by  virtue  of 
the  partnership  contract  to  bear  losses,  and  not  by  way  of  sub- 
rogation to  the  debt  which  he  lias  paid,  the  bill  cannot  be  main- 
tained, as  it  now  stands,  for  contribution  in  respect  of  a  single 
item.  But,  in  the  present  state  of  affairs,  the  defect  seems  to 
be  purely  formal,  and  the  plaintiff  may  apply  to  a  single  justice 
for  leave  to  make  any  amendment  he  may  desire  on  such  terms 
as  seem  proper;  otherwise,  the  bill  must  be  dismissed. 

14  Wills    V.    Murray,    4    Exch.  15  Hayward     v.     Hapgood,     4 

843,  868.    See  also  Fyler  v.  Fyler,      Gray  437;  Thayer  v.  Daniels,  110 
2  Railw.  Gas.  813.  Mass.    345. 


Certificates — Beneficiai.  Interests — Shares.      hi 

64 —  Transfe  ra  bility . 

A  trust  certificate  is  merely  evidence  of  the  number  of  shares 
or  beneficial  interest  one  may  have  in  a  trust ;  it  is  but  a  muni- 
ment of  title — documentary  evidence  of  ownership — not  the 
beneficial  interest  or  share  itself. ^^  One  of  the  main  incidents 
to  property  is  its  transferability;  the  power  of  disposing  of 
shares — like  the  power  of  disposing  of  any  other  property — is 
a  common  right  and  necessarily  attaches  to  ownership.  In  the 
light  of  established  business  methods  and  the  law  applicable 
thereto,  it  is  clearly  the  duty  of  trusts  and  corporations,  when 
required  so  to  do,  to  make  due  and  legal  transfer  of  all  their 
shares  and  stock  sold  and  assigned. ^''^  The  right  to  a  transfer 
of  a  certificate  of  a  trust  can  be  enforced  by  a  purchaser  who 
has  taken  an  assignment  of  it  in  a  duly  formal  manner,  al- 
though he  has  been  hostile  to  the  trust  and  is  carrying  on  a 
rival  business;  where  trustees  are  given  no  discretion  to  dis- 
criminate as  to  the  transfers  of  such  certificates,  it  is  then  the 
duty  of  the  trustees,  when  certificates  properly  assigned  be  pre- 
sented, to  transfer  the  said  beneficial  interest  on  the  books  of 
the  company  and  to  issue  a  new  certificate  in  lieu  of  the  one 
so  transferred.^^ 

65 — Sale  of — In  Reference  to  Security  Act. 

Trust  certificates  or  shares  in  states  in  which  there  is  no  se- 
curity act,  may  be  sold  and  dealt  in  as  a  matter  of  right;  but 
in  states  in  which  there  is  a  security  act,  no  general  rule  can 
be  laid  down.    The  act  in  force  in  Illinois  up  to  June  11,  1921, 

16  Malley  v.  Bowditch,  259  Fed.  Y.  174,  31  N.  E.  900,  17  L.  R.  A. 
809,  7  A.  L.  R.  608.  237,    30    Am.    St.    Rep.    658;    Al- 

17  7  R.  C.   L.  261.  vord   v.  Smith,   5   Pick.    (Mass.) 

18  Rice  V.   Rockefeller,   134   N.  232. 


112  Trusts  for  Business  Purposes. 

reads  in  part  as  follows :  "The  word  'issuer'  shall  include 
every  person  and  every  company,  trust,  partnership  or  associa- 
tion incorporated  or  unincorporated  heretofore  or  hereafter 
formed  for  any  lawful  purpose  and  organized  under  the  laws 
of  this  state,  or  any  foreign  state  or  country." 

It  would  seem  that  the  words  'organized  under  the  laws  of 
this  state'  restrict  the  act  to  an  organization  deriving  its  powers 
from,  statutory  enactment.  In  two  cases  hefore  the  United 
States  Supreme  Court  to  determine  whether  trusts  (one  of 
which  was  known  as  a  department  store  trust,  the  other  a  real  es- 
tate trust  engaged  in  buying,  improving,  holding  and  selling 
buildings  in  Boston)  were  subjected  to  a  tax  under  an  act  pro- 
viding taxation  for  organizations  under  the  laws  of  Massachu- 
setts, the  court  said^^  in  construing  the  phrase :  "the  pertinent 
question  in  this  connection  is :  are  these  trusts  organized  under 
the  laws  of  the  state ;  the  language  of  the  act — now  or  hereafter 
organized  under  the  laws  of  the  United  States,  etc. — imparts 
an  organization  deriving  power  from  statutory  enactment.  A 
trust  of  the  character  of  those  here  involved  can  hardly  be  said 
to  be  organized  within  the  ordinary  meaning  of  that  term." 

Tlie  legislature  of  Illinois  cured  the  defect  in  its  security  act 
by  an  amendment  striking  out  the  words  'organized  under  the 
laws  of  this  state,  or  any  foreign  state  or  territory.'  It  appears 
that  this  state,  in  striking  out  the  words  of  limitation,  i.  e.  the 
words  limiting  the  act  to  organizations  under  the  laws  of  its 
state,  brought  the  trust  under  the  Security  Act. 

19  Eliot  V.  Freeman,  220  U.  S.     424. 
178,   31   Sup.   Ct.   360,    55   L.   Ed. 


CHAPTER  VI. 
INTERSTATE  COMMERCE. 

66-^/n  General. 

One  of  the  principal  advantages  of  the  trust  as  a  business  or- 
ganization over  a  coi-poration  is  that  it  is  not  restricted  by  state 
lines ;  it  may  do  business  in  any  state  or  territory  without  re- 
gard to  any  foreign  corporation  act.  The  corporation  is  a 
creature  of  the  state;  it  comes  into  existence,  not  as  a  matter 
of  right,  but  as  the  result  of  a  charter  by  the  state  granting 
certain  privileges  to  it.  Being  an  artificial  person  it  has  no 
rights  beyond  the  limits  of  its  state  only  in  so  far  as  other 
states  permit  it  to  carry  on  business  within  their  borders. 
There  are  certain  rules  and  regulations  which  a  corporation 
must  follow  in  carrying  its  business  into  foreign  states  which, 
together  with  the  foreign  corporation  acts,  are  a  tax  and  an 
overhead  charge  on  an  expanding  business.  If  this  overhead 
were  an  initial  or  fixed  charge,  concerns  doing  a  general  busi- 
ness throughout  the  country  would  find  little  objection  to  it. 
However,  it  is  a  well  known  fact  that  most  of  the  legislatures 
in  recent  years  permit  scarcely  a  session  to  go  by  without  m.ak- 
ing  some  change  in  their  law  relative  to  foreign  corporations; 
these  changes  mean  increasing  tax  and  overhead.  Business  has 
been  not  only  hampered  and  restricted  by  the  tax  and  expense, 
but  in  addition  has  been  subjected  to  much  litigation  under  the 
foreign  corporation  acts.  There  are  numerous  decisions  in  ev- 
ery state  determining  all  sorts  of  questions  under  these  acts; 
this  is  costly  and  also  an  annoyance  which  business  should  not 
be  made  to  suffer.     Should  a  corporation  do  business  in  every 

(113) 


114  Trusts  for  Busine^ss  Purposes. 

state  the  mounting  exj^ense  of  keeping  up  with  the  changes  in 
the  laws  may  well  be  imagined.  Should  it,  for  any  reason,  fail 
to  keep  up  with  these  changes  and  amendments,  it  is  subject  to 
fines  and  penalties.  Business  organized  as  a  trust  obviates  all 
this  expense,  annoyance  and  difficulty. 

6/ — Trust  Not  Subject  to  Foreign  Corporation  Acts. 

One  of  the  best  examples  we  have  of  a  general  business  be- 
ing conducted  throughout  the  states  and  remaining  free  from 
the  burden  of  the  various  corporation  acts  is  the  express  com- 
panies. In  this  chapter  the  Adams  Express  Company  and  the 
United  States  Express  Company  will  be  discussed  in  reference 
to  interstate  business;  and  under  the  paragraph  on  Taxes  a 
decision  is  reported  relative  to  the  National  Express  Company. 
These  companies  were  not  corporations ;  they  were  associations 
with  trust  pow'ers,  and  the  evident  reason  for  this  form  of  or- 
ganization was  that  they  might  carry  on  their  business — nec- 
essarily interstate — without  being  subject  to  the  various  foreign 
corporation  acts.  These  cases  are  interesting  from  that  angle, 
but  they  illustrate  only  in  a  measure  what  business  noay  do  if 
organized  under  a  pure  trust  wherein  the  title  to  all  property  is 
in  the  trustees  who  are  free  from  the  will  of  the  beneficiaries. 

The  case  of  Kentucky  v.  The  Adams  Express  Company'^''  is 
w^orthy  of  attention,  because  of  the  magnitude  of  the  business 
conducted  by  an  unincorporated  company,  and  the  rules  of  law 
giving  such  organization  the  right  to  do  business  in  other 
states  without  complying  with  the  foreign  corporation  act.  The 
Adams  Express  Company,  in  doing  business  in  the  state  of 
Kentucky,  was  indicted  for  its  failure  to  comply  with  the  for- 

20  Commonwealth     v.     Adams      Express  Co.,  123  Ky.  720,  97   S. 

W.   386. 


Inti:rstate  Commerci;.  115 

[COMMONAVEALTH    v.    ADAMS    EXPRESS    CO.] 

eign  corporation  act.  The  company  was  called  a  joint-stock 
association,  and  in  some  jurisdictions  companies  of  this  char- 
acter are  subject  to  foreign  corporation  acts.  The  indictment 
was  quashed  and  the  Supreme  Court  sustained  this  action  in 
holding  that  the  Express  Company  was  not  a  corporation  and 
therefore  not  subject  to  the  foreign  corporation  act  of  Ken- 
tucky. There  might  have  been  some  doubt  as  to  a  joint-stock 
company  coming  under  a  foreign  corporation  act,  but  if  the 
Express  Company  had  been  organized  as  a  pure  trust,  in  all 
probability  it  would  not  have  been  indicted,  for  it  is  shown  con- 
clusively that  a  trust  may  do  business  in  the  states  as  a  matter 
of  right  under  the  constitution  of  the  United  States.  The  de- 
cision is  substantially  as  follows : 

Hobson,  C.  J.  The  Adams  Express  Company  is  a  joint- 
stock  association  created  under  the  laws  of  the  state  of  New 
York.  It  is  composed  of  about  3,000  members,  all  of  whom 
are  nonresidents  of  this  state.  The  associations  are  in  legal 
effect  partnerships,  although  they  are  treated  as  cj^uasi  corpora- 
tions for  the  purpose  of  serving  process  upon  them.  In  Adams 
Express  Company  v.  Schofield,^^  it  was  held  that  a  summons 
served  upon  an  agent  under  subsection  4  of  section  51  of  the 
Civil  Code  of  Practice  was  sufficient  service  upon  the  express 
company  on  the  ground  that  it  would  be  otherwise  impossible  to 
bring  an  association  of  3,000  members  before  the  court. 

In  the  case  now  before  us  the  Adams  Express  Company  has 
been  indicted  for  doing  business  in  this  state  without  having 
filed  with  the  secretary  of  state  the  statement  recj[uired  by  sec- 
tion 571,  Ky.  St.  1903.  That  section  is  in  these  words:  "All 
corporations  except  foreign  insurance  companies  formed  un- 
der the  laws  of  this  or  any  other  state,  and  carrying  on  any 

21111  Ky.  S33,  64  S.  W.  903. 


ii6  Trusts  for  Business  Purposes. 

[COaOIONWEALTH    v.    ADAMS    EXPRESS    CO.] 

business  in  this  state,  shall  at  all  times  have  one  or  more  known 
places  of  business  in  this  state  and  an  authorized  agent  or  agents 
thereat  upon  whom  process  can  be  served ;  and  it  shall  not  be 
lawful  for  any  corporation  to  carry  on  any  business  in  this 
state,  until  it  shall  have  filed  in  the  office  of  the  Secretary  of 
State  a  statement,  signed  by  its  president  or  secretary,  giving 
the  location  of  its  office  or  offices  in  this  state,  and  the  name  or 
names  of  its  agent  or  agents  thereat  upon  whom  process  can  be 
served;  and  it  shall  not  be  lawful  for  any  corporation  to  carry 
on  any  business  in  this  state,  until  it  shall  have  filed  in  the  office 
of  the  Secretary  of  State  a  statement,  signed  by  its  president  or 
secretary,  giving  the  location  of  its  office  or  offices  in  this  state 
and  the  name  or  names  of  its  agent  or  agents  thereat  upon 
whom  process  can  be  served ;  and  when  any  change  is  made  in 
the  location  of  its  office  or  offices  or  in  its  agents,  it  shall  at 
once  file  with  the  Secretary  of  State  a  statement  of  such  change 
for  the  purpose  of  service  until  statement  of  appointment  of 
new  agent  is  filed;  and  if  any  corporation  fails  to  comply  with 
the  requirements  of  this  section,  such  corporation,  and  any 
agent  or  employe  of  such  corporation,  who  shall  transact,  carry 
on  or  conduct  any  business  in  this  state  for  it,  shall  be  severally 
guilty  of  a  misdemeanor,  and  fined  not  less  than  one  hundred 
nor  more  than  one  thousand  dollars  for  each  offense." 

68 — Unincorporated  Is  Not  Embraced  in  Word  Corporation. 

The  only  question  we  deem  it  necessary  to  consider  is 
whether  the  express  company  is  a  corporation  within  the  mean- 
ing of  this  section.  Section  208  of  the  Constitution  provides: 
"The  word  corporation  as  used  in  this  Constitution  shall  em- 
brace joint  stock  companies  and  associations."  But  as  the  ques- 
tion before  us  does  not  turn  on  the  meaning  to  be  given  any 
provision  of  the  Constitution,  this  section  is  not  conclusive  of 


Interstate:  Commerce.  117 

.    [COMMOlsrWEALTH    v.    ADAMS    EXPRESS    CO.] 

the  question  before  us.     Section  457,  Ky.  St.   1903,  being  a 
part  of   the  act   for  the  construction  of   statutes,   is  in  these 
words :    "A  word  importing  the  singular  number  only  may  ex- 
tend and  be  applied  to  several  persons  or  things,  as  well  as  to 
one  person  or  thing,  and  a  word  importing  the  plural  number 
only  may  extend  and  be  applied  to  one  person  or  thing  as  well 
as  to  several  persons  or  things.     A  word  importing  the  mascu- 
line gender  only  may  extend  and  be  applied  to  females  as  well 
as  males ;  and  the  word  'person'  may  extend  and  be  applied  to 
bodies  politic  and  corporate  societies,  communities,  and  the  pub- 
lic generally,  as  well  as  individuals,  partnerships,  persons  and 
joint-stock   companies.      The   words    'corporation,'    'company,' 
may  be  construed  as  including  any  corporation,  company,  per- 
son, persons,  partnership,  joint-stock  company  or  association." 
It  is  manifest  that  a  word  importing  the  singular  number 
will  not  always  be  applied  to  several  persons  or  things ;  that  a 
word  importing  the  masculine  gender  will  not  always  be  ap- 
plied to  females.     So,  the  word  "corporation"  will  not  always 
be  construed  to  include  a  partnership  or  joint-stock  associa- 
tion.   "As  to  what  meaning  the  word  'corporation'  is  to  receive 
in  any  provision  of  statute,  of  course,  the  context  must  in  some 
measure  determine.     It   will  not  embrace  partnerships,   when 
not  so  intended  by  the  legislature."^^^     Bearing  this  rule  in 
mind,  what  meanings  are  we  to  give  the  word  "corporation" 
in  section  571  above  quoted?    The  section  is  a  part  of  an  act 
approved  April  5,    1893,  entitled,   "An  act  providing   for  the 
creation   and   regulation  of   private   corporations."      The    first 
section  of  the  act  Laws  1893,  p.  612,  c.  171  (see  Ky.  St.  1903, 
Sec.  538)  provides  for  what  purposes  such  corporations  may 
be  formed.    The  next  section  (section  539)  provides  what  the 
articles  of  incorporation  shall  specify.     Neither  of  these  sec- 

211  Adams  Express  Co.  v.  Schofield,  Supra. 


ii8  Trusts  for  Busine;ss  Purposes. 

[COMMON^VEALTH    v.    ADAMS    EXPRESS    CO.] 

tions  can  have  an  application  to  partnerships  or  unincorporated 
companies.  The  same  is  true  of  the  immediately  following  sec- 
tions of  that  article;  section  571  comes  in  the  same  article.  We 
have  been  unable  to  see  any  provision  from  the  beginning  of 
the  article  down  to  section  571  which  would  indicate  that  the 
legislature  had  in  mind,  or  was  attempting  to  regulate,  unin- 
corporated companies.  To  illustrate :  neither  sections  567, 
568,  569  nor  570  on  their  face  could  be  applied  to  unincor- 
porated companies.  Nor  could  section  573,  which  follows  it; 
nor  576.  An  unincorporated  company  could  not  truthfully 
print  upon  its  advertising  matter  the  word  "incorporated" 
(section  576).  An  unincorporated  company  might,  as  the  law 
then  stood,  engage  in  the  banking  business,  and  it  might  own 
real  estate  not  necessary  for  the  carrying  on  of  its  business  for 
a  longer  period  than  live  years  (section  567).  It  might  issue 
stock  or  bonds  without  an  ecjuivalent  in  money  or  property 
actually  received  (section  568)  ;  it  could  not  be  proceeded 
against  by  the  Attorney  General  (section  569).  It  was  not 
required  to  accept  any  provisions  of  the  Constitution,  and  could 
have  no  charter  containing  powers,  privileges,  or  immunities 
inconsistent  with  the  provisions  of  the  act  (section  570). 
These  sections  immediately  precede  section  571,  and  in  the 
sections  follov.'ing  it  to  the  end  of  the  article  there  is  nothing 
to  indicate  tliat  the  legislature  had  in  mind,  in  enacting  them, 
unincorporated  companies.  We,  therefore,  conclude  that,  read- 
ing section  571  with  the  other  provisions  of  the  act  immediately 
preceding  and  following  it  and  in  view  of  the  title  of  the  act 
and  its  manifest  purpose,  the  word  "corporations"  in  section 
571  only  includes  incorporated  companies,  and  does  not  include 
unincorporated  associations  such  as  joint-stock  companies. 

There  is  no  distinction  in  the  construction  of  statutes  betv.^een 
criminal  and  civil  enactments,  but  all  statutes  must  be  construed 


Interstate:  Commerce.  119 

[COMMONWEALTH    t.    ADAMS    EXPRESS    CO.] 

with  a  view  to  carry  out  the  intention  of  the  legislature.     Ky. 
St.   1903,  Sec.  459.     But  laws  which  create  crime  should  be 
sufficiently   explicit   that   men   subject  to   their   penalties   may 
know  what  acts  are  forbidden,  and  before  a  man  can  be  pun- 
ished, his  case  must  be  plainly  within  the  statute.22     Crime  is 
not  to  arise  upon  doubtful  construction  of  a  statute  where  a 
person  of  ordinary  intelligence,  reading  the  statute,  would  not 
understand  from  it  that  the  act  was  forbidden.     Criminal  stat- 
utes are  not  cunningly  and  darkly  framed  to  catch  the  unwary, 
and  they  are  not  extended  for  this  purpose  beyond  the  fair  and 
natural  meaning  of  the  words  used.     The  statute  in  question 
has  been  in  force  for  a  number  of  years,  and  in  no  case,  so  far 
as  we  are  aware,  until  the  present,  has  it  been  sought  to  be  ap- 
plied to  unincorporated  companies.     Section   194  of  the  Con- 
stitution is  as  follows:     "All  corporations  formed  under  the 
laws  of  this  state,  or  carrying  on  business  in  this  state,  shall, 
at  all  times,  have  one  or  more  known  places  of  business  in  this 
state,  and  an  authorized   agent   or  agents  there   upon   whom 
process  may  be  executed,  and  the  General  Assembly  shall  en- 
act laws  to  carry  into  effect  the  provisions  of  this  section." 
The  express  company  has  complied  with  this  provision.     It  has 
places  of  business  in  the  state  and  authorized  agents  there  upon 
whom  process  may  be  executed  so  that  no  provision  of  the  Con- 
stitution lias  been  violated.     Section  571   of  the  statute  was, 
perhaps,  enacted  to  carry  into  effect  the  provisions  of  the  Con- 
stitution as  to  private  corporations ;  but  nothing  more,  as  shown 
above,  was  in  the  mind  of  the  legislature  in  that  enactment. 
Judgment  affirmed. 

The  trial  court  held  that  the  Adams  Express  Company  was 
not  a  corporation,  and  for  that  reason  it  was  not  subject  to  the 

22  U.   S.    V.   Lacher,    134    U.    S.      628,   10   Sup.  Ct.   625,   33   L.   Ed. 

1080. 


120  Trusts  for  Busine;ss  Purposes. 

[PEOPLE   V.   KOSE.] 

foreign  corporation  act  of  Kentucky;  the  supreme  court  sus- 
tained this  view.  Under  this  rule,  as  a  matter  of  course,  the 
trust  is  not  subject  to  the  foreign  corporation  acts. 

Trust  Protected  in  Trade  Name. 

69 — In  General. 

The  United  States  Express  Company  as  such  was  doing  busi- 
ness in  IlHnois  with  its  principal  ofifice  in  Chicago.  Other  par- 
ties sought  to  secure  a  charter  from  the  State  of  IlHnois  for 
the  incorporation  of  another  United  States  Express  Company 
on  the  theory  that  the  company  then  doing  business  was  not 
incorporated;  that  it  did  not  comply  with  the  foreign  corpora- 
tion act  of  Illinois ;  that  it  was  unlawful  to  conduct  a  business 
under  the  name  of  the  United  States  Express  Company  in  Illi- 
nois without  complying  with  the  laws  of  that  state.  The  sec- 
retary of  state  refused  to  issue  a  charter  to  the  parties  seeking 
to  usurp  the  name  of  the  United  States  Express  Company. 
The  court,  in  passing  on  the  question,  maintained  tliat  inas- 
much as  the  Express  Company  had  an  established  business  it 
would,  in  substance,  be  a  fraud  on  the  public  to  permit  people 
other  than  those  then  conducting  the  business  under  the  name 
of  United  States  Express  Company  to  use  that  name.^* 

The  parties  seeking  to  incorporate  filed  a  petition  for  man- 
damus to  compel  the  secretary  of  state,  James  A.  Rose,  to  issue 
a  charter  to  them  and  alleged  in  substance  that :  Patrick  L. 
Touhy,  William  H.  Peacock  and  F.  T.  Donovan,  acting  as 
commissioners  under  the  corporation  act  of  Illinois  and  the 
amendments  thereto,  filed  in  the  office  of  the  secretary  of  state 

23  This  case   is   known   in   the       219  111.  46,  76  N.  E.  42. 
reports  as   The   People  v.   Rose, 


Interstate  Commerce.  121 

IPEOPLE   V.   ROSE.l 

at  Springfield  a  statement  or  application  for  a  license  to  open 
books  of  subscription  to  the  capital  stock  of  a  company  to  be 
known  as  or  named  "United  States  Express  Company."  with  a 
capital  stock  of  $2500.  to  be  divided  into  twenty-five  shares  of 
$100.  each;  that  the  object  for  which  the  company  was  to  be 
formed  was  to  receive,  carry  and  transport  for  hire  packages 
large  or  small  and  to  do  a  general  express  business,  the  life  of 
the  company  to  be  ninety-nine  years  with  its  principal  office  in 
Chicago ;  that  the  said  statement  or  application  was  duly  signed 
and  acknowledged  according  to  law  by  the  commissioners,  and 
the  fee  of  $30.  as  required  by  law  was  on  said  day  paid  to  the 
secretary  of  state,  who  did  on  February  23,  1905,  issue  a  li- 
cense to  said  commissioners,  authorizing  them  to  open  books 
of  subscription  to  the  capital  stock  of  the  United  States  Express 
Company,  which  said  license  was  signed  by  the  secretary  of 
state  and  sealed  with  the  great  seal  of  State,  copy  being  at- 
tached to  the  petition ;  that  the  commissioners  opened  books  of 
subscription  for  the  capital  stock  of  the  United  States  Express 
Company,  and  the  stock  was  all  subscribed  for,  to  wit :    Patrick 
L.  Touhy,  one  share  $100. ;  F.  R.  Power,  twenty-three  shares 
$2300.00;  F.  G.   Crary,  one  share  $100.;  that  thereafter  the 
commissioners  on  March  6,   1905,  at  Chicago,  at  two  o'clock 
P.  M.,  convened  a  meeting  of  the  subscribers  of  stock  pursuant 
to  notice  required  by  law,  for  the  purpose  of  electing  a  Ijoard 
of  directors,  etc.,  which  notice  was  deposited  in  the  post-office, 
properly  addressed  to  each  subscriber  ten  days  before  the  time 
fixed  for  the  meeting ;  that  the  subscribers  met  at  the  time  and 
place  specified  in  the  notice  and  proceeded  to  elect  directors, 
and  that  the  following  persons  were  duly  elected  for  the  term 
of  one  year :     Patrick  L.  Touhy,  F.  R.  Power,  and  F.  A.  An- 
drews; and  that  the  post-office  address  of  said  company  was 
at   171   Washington  Street,  Chicago;  that  thereupon  the  com- 


122  Trusts  for  Business  Purposes. 

[PEOPLE   V.   ROSE.l 

missioners  made  a  report  of  their  acts  and  doings  as  such  to 
the  secretary  of  state,  stating  therein  that  they  opened  books 
of  subscription ;  that  the  stock  was  fully  subscribed,  and  giving 
a  copy  of  said  subscription,  and  that  pursuant  to  notice,  copy 
of  which  was  set  forth,  the  subscribers  to  the  stock  met  and 
elected  directors  as  above  stated,  and  also  that  the  post-office 
address   of    said   company   was    No.    171    Washington    Street, 
Room  303,  in  Chicago,  which  said  report  was  on  March  6,  1905, 
sworn  to  before  a  notary  public  by  said  commissioners.     The 
petition  further  stated  that  the  report  was  mailed  to  the  secre- 
tary of  slate,  and  by  him  received  at  his  office  in  Springfield  on 
or  about  Alarch  9,  1905  ;  that  there  was  no  company  chartered 
under  the  laws  of  Illinois  to  do  business  in  the  name  of  United 
States  Express  Company,  and  that  there  was  no  foreign  com- 
pany or  corporation  licensed  to  do  business  in  Illinois  in  the 
name  of  United  States  Express  Company;  that,  when  the  Sec- 
retary of  State  received  the  report,  being  in  all  respects  as  by 
law  required,  it  was  his  legal  duty  to  file  the  same  in  his  office 
and  issue  the  final  certificate  of  incorporation  of  the  company; 
yet,  tliat  the  said  Rose,  so  being  such  secretary  of  state,  wholly 
refused  to  file  the  report  and  to  issue  the  final  certificate  of  in- 
corporation of  said  company  as  required  by  the  statute;  that 
the  said  Rose,  as  such  secretary,  returned  said  report  to  peti- 
tioners and  refused  to  complete  the  final  organization  of  said 
company  by  receiving  and  filing   said  report  and  issuing  the 
final  certificate  of  incorporation  by  m.eans  whereof  the  peti- 
tioners were  denied  the  right  of  becoming  a  corporation  under 
the  name  of  "United  States  Express  Company,"  to  which  they 
were    iustlv    and    lawfully    entitled.       Petitioners,    therefore, 
prayed  a  writ  of  mandamus,  directed  to  said  Rose,  Secretar} 
of  State,  commanding  him  forthwith  to  receive  the  report  of 
the  commissioners,  and  to  file  it  and  issue  a  certificate  of  the 


Interstate  Commerce.  123 

[PEOFLE   V.   KOSE.l 

complete  organization  of  the  corporation,  and  that  such  further 
order  be  entered  in  the  premises  as  justice  may  require. 

The  secretary  of  state  in  answering  the  petition  alleged  that 
the  court  was  without  jurisdiction  to  hear  and  determine  the 
matters  set  out  in  the  petition;  that  respondent  did  not  deny 
any  of  tlie  allegations  of  fact  in  the  petition  except  that  he  had 
no  knowledge,  and,  therefore,  neither  admitted  nor  denied  the 
allegations  respecting  the  opening  of  books  for  subscription  to 
the  capital  stock  aforesaid,  or  whether  the  stock  was  fully  sub- 
scribed, or  whether  a  meeting  of  the  subscribers  was  convened 
and  held  according  to  law,  or  whetlier  a  board  of  directors  was 
elected  as  alleged.  The  answer  denied  that  it  was  the  legal 
duty  of  respondent  to  issue  a  final  certificate  of  incorporation 
to  said  United  States  Express  Company;  and  further  denied 
that  said  petitioners,  or  any  of  them,  had  a  right  to  incorporate 
under  the  laws  of  Illinois  under  the  name  of  "United  vState- 
Express  Company."  The  answer  further  stated  that,  when  the 
license  was  issued  out  of  respondent's  ofifice,  it  was  done  by  one 
of  his  clerks  who  supposed  at  the  time  that  the  parties,  desiring 
to  incorporate  under  the  said  name,  were  the  same  persons  in- 
terested in  the  company  hereinafter  mentioned  known  as  "The 
United  States  Express  Company,"  and  that  no  question  was 
made  at  the  time  concerning  the  issuing  of  said  license;  that 
subsequently  thereto  respondent  was  informed  that  the  parties 
to  whom  the  license  had  been  issued  were  in  nowise  interested 
in  the  United  States  Express  Company  hereinafter  mentioned ; 
"that  there  is  now  in  existence  a  joint-stock  company,  called 
'United  States  Express  Comjmny,'  organized  and  doing  busi- 
ness under  the  common  law  and  statute  law  of  the  State  of 
New  York,  and  that  the  United  States  Express  Company  here 
referred  to  will  hereinafter  be  mentioned  as  the  old  United 
States  Express  Company;"  that  "said  old  United  States  Ex- 


124  Trusts  for  Business  Purposes. 

[PEOPLE   V.   ROSE.] 

press  Company  was  organized  as  a  joint-stock  association  or 
joint-stock  company  on  the  22nd  day  of  April,   1854,  in  the 
State  of  New  York,  and  that  said  old  United  States  Express 
Company  thereupon  entered  upon  the  transaction  of  a  general 
express  business  throughout  the  United  States,  and  has  been 
ever  since  engaged  in  said  business,  and  is  now  engaged  in  the 
same  in  every  State  and  territory  of  the  United  States  as  well 
as  in  the  dominion  of  Canada  and  in  foreign  countries;  that 
the  said  old  United  States  Express  Company  carries  on  its  busi- 
ness upon  various  railroads  and  steamship  lines  throughout  the 
United  States  and  Canada  and  also  in  foreign  countries ;  and 
that  its  business  in  a  general  way  consists  of  the  transporting 
and  delivering  of  large  and  small  packages  of  freight,  merchan- 
dise, valuable  documents,  papers  and  moneys,  and  that  it  has 
been  engaged  in  said  business  continuously  ever  since  the  time 
of  its  organization  as  aforesaid ;  that  its  name  is  placed  upon 
express  cars   on  various   railroads   in  the   United    States   and 
upon  its  wagons  used  to  transport  the  merchandise,  papers  and 
moneys  above  referred  to ;  and  that  said  old  United  States  Ex- 
press Company  is  possessed  of  and  operating  many  hundreds 
of  wagons  by  means  of  thousands  of  horses  owned  by  it;  and 
that  the  name  'United  States  Express  Company'  is  well  known 
throughout  all  of  the  United  States  and  foreign  countries  as  a 
company  engaged  in  the  transportation  and  delivery  of  mer- 
chandise, valuable  packages,  and  money,  for  hire." 

The  answer  further  said  that,  subsequent  to  the  issuance  of 
said  license  and  prior  to  the  time  of  his  receiving  the  report  of 
the  commissioners,  he  was  informed  and  believed  it  to  be  true 
that  the  use  by  any  persons  of  said  name,  whether  associated 
as  incorporators  or  as  co-partners  or  as  individuals,  would  be 
a  fraud  upon  the  old  United  States  Express  Company. 


Interstate  Commerce.  125 

[PEOPLE   V.   ROSE.l 

70 — Business  Name  Protected  by  Injunction. 

The  answer  further  said  that  the  petitioners  were  not,  prior 
to  the  filing  of  the  said  bill,  nor  was  any  of  them  engaged  in  the 
express  business;  that  the  incorporation  of  said  persons  under 
the  name  "United  States  Express  Company"  was  a  new  ven- 
ture, and  so  far  as  the  objects  of  said  incorporation  relative  to 
the  doing  of  an  express  business  were  concerned,  it  was  a  mat- 
ter concerning  the  future  and  it  was  not  intended  that  said 
corporation  take  over  or  continue  any  existing  express  busi- 
ness ;  that  respondent  believed  that  the  petitioners  liad  no  right 
to  become  incorporated  under  the  laws  of  Illinois  as  the  United 
States  Express  Company  and  for  these  reasons  he  refused  to 
issue  a  final  certificate  of  incorporation  to  the  said  persons  as 
"United  States  Express  Company." 

The  petitioners  filed  a  general  and  special  demurrer  to  this 
answer  and  the  court,  in  passing  on  the  issues  raised,  said: 
"By  the  demurrer  to  the  answer,  the  allegations  of  fact  in  the 
answer  are  admitted  to  be  true.  Under  these  allegations,  as  set 
forth  in  the  statement  preceding  this  opinion,  the  company  re- 
ferred to  in  the  answer  as  the  'old  United  States  Express 
Company,'  would  have  the  right  and  power  to  restrain  by  in- 
junction the  use  of  its  name  by  petitioners  herein,  or  by  the 
new  corporation  which  they  propose  to  form.  In  International 
Com.  Y.  W.  C.  A.  V.  Y.  W.  C.  A.^*  we  held  that,  although 
generic  terms  or  mere  descriptive  words  are  the  common  prop- 
erty of  the  public  and  not  ordinarily  susceptible  of  appropria- 
tion by  an  individual,  yet  an  injunction  may  issue  to  restrain 
the  use  of  such  terms,  or  words,  at  the  suit  of  one  who  has 
already  adopted  them,  where  the  evidence  shows  a  fraudulent 

24  194  111.  194,  62  N.  E.  551. 


126  Trusts  for  Business  Purposes. 

[PEOPLE   V.   ROSE.] 

design  and  that  the  pubhc  will  be  misled.  In  cases  referred  to 
and  quoted  from  in  the  Y.  W.  C.  A.  case,  supra,  it  was  held 
that,  although  certain  plaintiffs  had  no  exclusive  right  to  the 
words  'Conveyance  Company,'  or  'London  Conveyance  Com- 
pany,' or  any  other  words,  they  had  a  right  to  call  upon  a  court 
of  chancery  to  restrain  the  defendant  from  fraudulently  using 
precisely  the  same  words  and  devices  which  they  had  taken 
for  the  purpose  of  distinguishing  their  property,  and  thereby 
depriving  them  of  the  fair  profits  of  their  business  by  attract- 
ing custom  on  false  representation ;  that  carriages,  really  be- 
belonging  to  the  defendant,  belonged  and  were  under  the  man- 
agement  of  the  plaintiff.  It  was  there  held  that,  although  there 
was  no  property  in  the  words  'The  Guinea  Coal  Company,'  yet 
it  was  a  fraud  on  a  person  who  had  an  established  trade  and 
carried  it  on  under  a  given  name,  that  some  other  person  should 
assume  the  same  name  with  a  slight  alteration,  as  'The  Pall 
Mall  Guinea  Coal  Company,'  in  such  a  way  as  to  induce  per- 
sons to  deal  with  him  in  the  belief  that  they  were  dealing  with 
the  person  who  had  given  a  reputation  to  the  name ;  in  other 
-words  "that  it  is  a  fraud  on  the  part  of  a  defendant  to  set  up 
business  under  such  a  designation  as  is  calculated  to  lead,  and 
does  lead,  other  people  to  suppose  that  his  business  is  the  busi- 
ness of  another  person." 

In  McLean  v.  Fleming,^^  it  is  said:  'Nor  is  it  necessary,  in 
order  to  give  a  right  to  an  injunction,  that  a  specific  trademark 
should  be  infringed,  but  it  is  sufficient  that  the  court  is  satis- 
fied that  there  was  an  intent  on  the  part  of  the  respondent  to 
palm  off  his  goods  as  the  goods  of  the  complainant.'  The  same 
doctrine  is  announced  in  other  cases.^^ 

25  96  U.  S.  245.  R.  I.  496;    Rudolph  v.  Southern 

28  Lane  v.  Brothers,  etc.,  120  Beneficial  League,  23  Abbott's 
Ga.  355;  Aiello  v.  Montecalfe,  21      N.  C.  199. 


Interstate  Commerce.  127 

[PEOPLE   V.   ROSE.l 

In  the  case  at  bar,  the  old  United  States  Express  Company 
had  liad  an  established  business  in  the  United  States,  and  in 
■foreign  countries,  for  more  than  fifty  years,  when  the  petition- 
ers made  application  to  the  Secretary  of  State  to  organize  a 
corporation  in  Illinois  under  the  same  name,  to-wit,  the  'United 
States  Express  Compan)^'  It  appears  from  the  allegations  in 
the  answer  that  the  incorporation  of  the  new  company  under 
the  same  name  as  the  old  company,  would  be  a  fraud  upon  the 
old  company  as  being  an  attempt  to  take  away  from  it  a  part  of 
its  business,  and  to  deceive  the  public  into  the  belief  that,  when 
dealing  with  the  new  company,  they  were,  as  matter  of  fact, 
dealing  with  the  old  company.  Indeed,  the  answer  specifically 
alleges  that  the  action  proposed  to  be  taken  by  the  commission- 
ers, would  be  a  fraud  upon  the  old  company,  and  the  dem.urrer 
to  the  answer  admits  this  allegation. 

It  being  true,  then,  tliat  the  old  company  would  be  entitled 
to  file  a  bill  in  chancery  to  enjoin  the  new  corporation  proposed 
to  be  organized  from  doing  business  under  the  same  name  as 
the  old  company,  the  writ  of  mandamus  will  not  issue  to  com- 
pel the  secretary  of  state  to  issue  a  certificate  of  organization 
to  the  new  company.  The  writ  of  mandamus  will  not  be  is- 
sued, if  its  issuance  would  fail  to  accomplish  a  good  purpose, 
or  to  have  a  beneficial  effect.  "The  writ  is  not  granted  as  a 
matter  of  al^solute  right,  and  where  it  can  be  seen  that  it  can- 
not accomplish  any  good  purpose,  or  that  it  will  fail  lo  have  a 
beneficial  effect,  it  will  be  denied. "^^  It  is  difficult  to  see  how 
the  issuance  of  the  writ  in  this  case  could  accomplish  any  good 
purpose,  or  have  any  beneficial  effect,  if  the  new  corporation, 
proposed  to  be  organized,  could  be  enjoined  from  using  the 
name  of  the  old  company,  and  doing  business  under  that  name. 

87Cristinan    v.    Peck,    90    111.      Illinois  Watch  Case  Co.  v.  Pear- 
1.50;   People  v.  Lieb,  85  111.  484;       son,  140  111.  423. 


128  Trusts  for  Business  Purposes. 

[PEOPLE   V.   ROSE.] 

71 — Joint-Stock    Companies   and    Partnerships    Distinguished 
from  Corporations. 

It  is  contended,  on  the  part  of  the  petitioners,  that  the  old 
United  States  Express  Company  is  a  foreign  corporation,  or- 
ganized under  the  laws  of  New  York,  and  tliat,  as  such  foreign 
corporation,  it  cannot  be  admitted  to  do  business  in  Illinois  ex- 
cept by  comity  of  the  latter  State.  It  is  furthermore  insisted 
that  the  old  United  States  Express  Company  cannot  do  business 
in  this  State,  or  maintain  any  suit  in  the  courts  of  this  State, 
because  it  lias  not  obtained  a  license  so  to  do  business  in  Illinois 
from  the  secretary  of  state  of  Illinois.  Many  decisions  are 
referred  to  by  counsel  in  support  of  this  position.  The  argu- 
ment proceeds  upon  the  supposition  that  the  old  United  States 
Express  Company  is  a  foreign  corporation.  It  does  not  appear, 
however,  clearly,  upon  this  record,  that  it  is  a  foreign  cor- 
poration. 

The  answer  avers  'that  there  is  now  in  existence  a  joint- 
stock  company  called  United  States  Express  Company,  organ- 
ized and  doing  business  under  the  common  law  and  statute  law 
of  the  State  of  New  York.'  The  demurrer  to  the  answer  ad- 
mits this  allegation  to  be  true.  For  the  purposes  of  this  case, 
therefore,  the  old  United  States  Express  Company  is  to  be 
regarded  as  a  joint  stock  company  organized  and  doing  business 
under  the  common  law,  as  well  as  the  statute  law  of  the  State 
of  New  York.  A  joint-stock  company  is  defined  in  the  text 
books  to  be  'an  association  of  individuals  for  purposes  of  profit, 
possessing  a  common  capital  which  is  divided  into  shares  of 
which  each  member  possesses  one  or  more,  and  which  are 
transferable  by  the  owner.  These  associations,  formed  for 
business  purposes,  were  at  common  law,  and,  as  a  general  rule, 
still  are  considered  merely  as  partnerships,  and  their  rights  and 


Interstate  Commerce.  129 

fPEOPLE   V.   KOSE.] 

liabilities  are  in  the  main  governed  by  the  same  rules  and  prin- 
ciples which  regulate  commercial  partnerships. '^^  While  it  is 
true  that  many  companies  called  joint-stock  companies  have 
many  of  the  essential  characteristics  of  a  corporation,  yet  there 
is  a  distinction  between  such  companies  and  regularly  organized 
corporations,  so-called.  In  17  Am.  &  Eng.  Ency.  of  Law,  2d 
ed.,  p.  638,  it  is  said :  "In  respect  to  their  formation  there  is  a 
broad  distinction  between  a  corporation,  technically  so  called, 
which  always  owes  its  existence  to  the  sovereign  power  of  the 
State,  and  a  joint-stock  company  which  being  essentially  a  part- 
nership is  brought  into  being  by  the  contract  of  its  members 
inter  sese."  Counsel  refer  to  cases  in  other  states  and  in  the 
Federal  courts,  holding ,  tliat  joint-stock  companies  possess 
many  of  the  characteristics  of  corporations,  but  the  definition 
which  characterizes  them  as  partnerships  has  been  recognized 
as  correct,  if  not  actually  adopted,  by  the  decisions  of  the  Illi- 
nois courts. 

In  Robbins  v.  Butler,^^  this  court,  speaking  through  Mr. 
Justice  Breese,  said :  "These  stock  companies  are  nothing  more 
than  partnerships,  and  every  member  of  the  company  is  liable 
for  the  debts  of  the  concern,  no  matter  what  the  private  ar- 
rangements among  themselves  may  be,  if  they  have  not  shifted 
their  liability  in  the  very  mode  pointed  out  in  the  articles  of 
association.''^^  In  Wadsworth  v.  Duncan,^!  this  court,  speaking 
through  Mr.  Justice  Phillips,  again  said,  endorsing  the  doctrine 
announced  in  Robbins  v.  Butler,  supra,  as  follows:  "The 
members  of  a  joint-stock  association  are  partners,  and  each 
member  is  liable  for  the  debts  of  the  assocjation  unless  he  has 

28  17  Am.  &  Eng.  Ency.  of  Law  30  Pettis  v.  Atkins,  60  111.  454; 
2d  ed.,  pp.  636,  637.                              Hodgson  v.  Baldwin,  65  111.  532, 

29  24    111.   387.  31164  111.  360,  45  N.  E.  132. 


130  Trusts  for  Business  Purposes. 

[PEOPLE   V.   ROSE.] 

shifted  his  liability  in  the  very  mode  pointed  out  in  the  articles 
of  association." 

72 — Foreign   Corporation   Acts  not   Applicable   to    Organiza- 
tions Created  by  Contract. 

In  view  of  what  has  been  said,  it  is  not  altogether  certain 
that  the  old  express  company,  which  is  admitted  here  to  be  a 
joint-stock  company,  is  such  a  foreign  corporation  as  is  re- 
quired by  our  statute  to  file  a  copy  of  its  charter  or  articles  of 
incorporation  or  certificate  of  incorporation,  in  the  office  of  the 
secretary  of  state.  The  statute,  imposing  the  requirement  in 
question  upon  a  foreign  corporation  desiring  to  do  business  in 
this  State,  speaks  of  "every  company  incorporated  for  the  pur- 
poses of  gain  under  the  laws  of  any  other  state,"  etc.,  and,  in 
the  subsequent  part  of  the  section  which  uses  the  words  just 
quoted,  the  company,  so  incorporated,  is  referred  to  as  "such 
corporation,"  and  not  as  "such  company" ;  and  it  would  seem 
to  be  the  proper  construction  of  the  statute  in  question,  (4  Starr 
&  Cur.  Ann.  Stat. — sup.  ed.,  p.  310)  that  it  refers  to  regularly 
organized  corporations,  rather  than  to  joint-stock  companies. 
This  is  so  because,  as  has  already  been  stated,  the  corporation, 
technically  socalled,  owes  its  existence  to  the  sovereign  power 
of  the  State,  while  the  joint-stock  company,  being  merely  a 
partnership,  is  brought  into  being  by  contract  of  its  members. 
The  statutory  requirement  embraces  foreign  corporations  rather 
than  joint-stock  companies,  because  the  former  owe  their  ex- 
istence to  the  power  of  a  foreign  State;  and  statutes  in  rela- 
tion to  requirements,  imposed  upon  foreign  corporations,,  con- 
cern the  creatures  of  the  foreign  states  and  not  the  creatures 
which  are  brought  into  being  by  the  mere  contract  of  parties. 
In  the  case  at  bar,  the  provisions  of  the  instrument  or  articles 


1 


Interstate  Commerce.  131 

[PEOPLE   V.   EOSE.] 

of  organization  under  which  the  old  United  States  Express 
Company  acts  and  does  business,  are  not  anywhere  set  forth 
in  the  present  record.  We  are  unable  to  say  what  the  terms  of 
its  articles  of  association  are  as  they  are  not  set  forth  in  the 
pleadings.  But  whether  the  view  thus  taken  of  the  character 
of  the  old  United  States  Express  Company  is  correct  or  not,  it 
is  certainly  a  matter  of  doubt  whether  it  is  a  corporation  or  a 
mere  partnership.  Under  these  circumstances  the  writ  of 
mandamus  will  not  be  issued.  "The  writ  is  never  granted  in 
doubtful  cases,  nor  unless  the  party  asking  it  has  a  clear 
right."32 

73 — Trusts  May  Use  Trade  Name  for  Legitimate  Purposes. 

It  is  furthermore  contended  by  the  petitioners  herein  that, 
if  the  old  United  States  Express  Company  is  not  a  corporation, 
then  it  had  no  right  to  use  the  name  "United  States  Express 
Company"  in  the  transaction  of  business  in  the  State  of  Illinois. 
This  contention  is  based  upon  the  alleged  ground  tliat  the  Crim- 
inal Code  of  this  State  makes  it  an  offense  to  assume  and  use 
a  corporate  name  in  transacting  business,  not  being  incorpor- 
ated. The  provision  of  the  Criminal  Code  thus  referred  to 
reads  in  part  as  follows :  "If  any  company,  association  or  per- 
son puts  forth  any  sign  or  advertisement  and  therein  assumes, 
for  the  purpose  of  soliciting  business,  a  corporate  name,  not 
being  incorporated,  such  company,  association  or  person  shall 
be  fined  not  less  tlian  $10.00,  nor  more  than  $200.00,  and  a 
like  sum  for  each  day  he  or  it  shall  continue  to  offend  after 
having  been  once  fined."  (i  Starr  &  Curt.  Ann.  Stat.  2d.  ed. 
p.  1332,  sec.  368.) 

32  High    on    Ex.    Legal    Rem.,      v.  Pearson,   Supra, 
sec.  9;    Illinois  Watch  Case  Co. 


132  Trusts  for  Business  Purposes. 

FPEOPLE   V.  BOSE.l 

The  section  of  the  Criminal  Code  above  quoted  was  passed 
in  March,  1869,  either  in  the  above  or  a  more  stringent  form. 
The  answer  shows  that  the  old  United  States  Express  Com- 
pany was  organized  in  1854,  fifteen  years  before  this  statute 
was  passed,  and  had  been  doing  business  throughout  the  coun- 
try for  many  years  before  its  passage.  During  the  years  prior 
to  its  passage  when  it  was  thus  transacting  business,  it  cannot 
be  said  that  it  was  not  doing  business  in  good  faith,  or  that  it 
was  doing  business  with  any  intention  of  violating  the  law  in 
question,  because  the  law  in  question  was  not  then  in  existence. 
It  is  to  be  observed,  however,  that  the  statute  does  not  de- 
nounce the  assuming  of  a  corporate  name,  but  the  putting  forth 
of  a  sign  or  advertisement,  and  thereby  assuming  a  corporate 
name  for  the  purpose  of  soliciting  business.  It  cannot  be  said 
here  that  the  old  company  in  question  put  forth  its  corporate 
name  for  any  such  purpose.  "Wliat  the  legislature  had  in 
view  in  enacting  this  section  of  the  Criminal  Code  manifestly 
was  to  prevent  persons  from  obtaining  a  fictitious  credit  by 
advertising  themselves  as  being  a  corporation  when  they  were 
not  incorporated."^^  Under  the  allegations  of  the  answer  here- 
in, which  are  admitted  to  be  true  by  the  demurrer,  it  cannot  be 
said  that  the  old  company  here  under  consideration  was  in  any 
way  advertising  itself  as  a  corporation  for  the  purpose  of  ob- 
taining a  fictitious  credit.  Before  the  criminal  statute  was 
passed,  it  already  had  a  credit  which  was  not  fictitious,  so  far 
as  the  present  record  shows.  The  fraud,  which  the  criminal 
statute  in  question  seeks  to  punish  or  to  prevent,  is  the  use  of 
a  name  in  such  a  way  as  to  deceive  the  public,  and  it  is  the 
deception  or  improper  use  of  the  name,  and  not  the  name  itself, 
which  constitutes  such  fraud.     "It  is  not,  therefore,  enough  to 

83Edgerton  v.  Preston,  15  Ill.App.  23. 


Interstate;  Commerce.  133 

[PEOPLE   V.   ROSE.l 

show  the  mere  use  of  the  name  to  make  out  a  violation  of  the 
statute;  there  must  be  some  evidence  at  least,  tending  to  show 
such  use  as  the  statute  forbids."^* 

It  is  furthermore  to  be  observed  that  this  criminal  statute 
does  not  make  contracts  made  by  persons  guilty  of  the  offense 
prohibited,  invalid,  but  merely  provides  that  such  persons  shall 
be  liable  to  pay  a  certain  fine.  It  would  appear,  therefore,  that 
a  violation  of  the  statute  can  be  attended  with  no  other  conse- 
quences than  merely  the  infliction  of  the  penalty  therein  pre- 
scribed.^*^ 

For  the  reasons  above  stated,  we  are  of  the  opinion  that  the 
Secretary  of  State  properly  refused  to  issue  a  certificate  of 
complete  organization  of  the  new  corporation  proposed  to  be 
organized  by  the  petitioners,  and  that  the  prayer  of  the  petition 
herein  for  a  mandamus  must  be  and  is  denied." 

In  this  case  the  court  not  only  recognizes  the  right  of  an 
organization  created  by  contract  among  its  members  to  exist — 
as  distinguished  from  a  corporation  which  owes  its  existence 
to  the  sovereign  power  of  the  state,  but  also  protects  it  in  its 
established  business.  The  trust  belongs  to  that  group  of  or- 
ganizations which  is  brought  into  being  by  contract  with  its 
members. 

74 — Right  of  Trust  to  do  Interstate  Business. 

Trustees  have  the  same  rights  and  privileges  as  individuals 
and  as  such  may  do  business  in  any  state  in  the  union  under 
protection  of  the  Federal  Constitution.  The  state  of  Indiana 
sought  to  prohibit  non-residents  as  such  from  being  trustees 
in  property  in  that  state.  The  statute  involved  reads  as  fol- 
lows:    "It  shall  be  unlawful  for  any  person,  association,  or 

34  Imperial      Manf.       Co.       v.  341  Edgerton  v.  Preston,  Supra. 

Schwartz,  105  111.  App.  525. 


134  Trusts  for  Business  Purposes. 

corporation  to  nominate  or  appoint  any  person  a  trustee  in  any 
deed,  mortgage,  or  other  instrument  in  writing,  (except  wills) 
for  any  purpose  whatever,  who  shall  not  be  at  the  tim.e  a  bona 
fide  resident  of  the  state  of  Indiana;  and  it  shall  be  unlawful 
for  any  person  who  is  not  a  bona  fide  resident  of  the  state  to 
act  as  such  trustee.  And  if  any  person,  after  his  appointment 
as  such  trustee,  shall  remove  from  the  state,  then  his  rights, 
powers,  and  duties  as  such  trustee  shall  cease,  and  the  proper 
court  shall  appoint  his  successor,  pursuant  to  the  act  to  which 
this  is  supplemental." 

The  Federal  Court,  in  passing  on  this  statute,  reads  into  its 
decision  Section  2  of  Article  4  of  the  Constitution  of  the 
United  States,  which  declares  that  "the  citizens  of  each  state 
shall  be  entitled  to  all  the  privileges  and  immunities  of  citizens 
in  the  several  states"  and  the  court  then  said :  "A  citizen  of 
the  United  States  cannot  be  denied  the  right  to  take  and  hold 
absolutely  real  or  personal  property  in  any  state  of  the  Union, 
nor  can  he  be  denied  the  right  to  accept  the  conveyance  of 
such  property  in  trust  for  his  sole  benefit,  or  for  the  benefit  of 
himself  and  others.  This  right  is  incident  to  national  citizen- 
ship."35 

This  same  rule  of  law  that  the  trust,  through  its  trustees,  is 
a  citizen  of  the  United  States,  that  as  such  it  may  do  business 
in  any  section  of  the  country,  is  followed  and  emphasized  by 
a  later  case^^  in  the  federal  court,  which  is  hereafter  reported 
in  substance. 

Action  by  Elbert  W.  Shirk,  trustee,  against  the  city  of 
LaFayette;  on  motion  to  dismiss  the  complaint  for  want  of 
jurisdiction;  overruled.     Baker,  District  Judge;  action  by  the 

36  Farmers  Loan  &  Trust   Co.  36  Shirk  v.  City  of  LaFayette, 

V.  C.  &  A.  Ry.  Co.,  27  Fed.  146.      52   Fed.   857. 


Interstate  Commerce.  i35 

plaintiff  as  trustee  against  the  defendant  to  recover  damages  for 
the  diversion  and  use  of  water.     The  complaint  in  substance 
alleged  that  the  plaintiff  was  a  citizen  of  the  state  of  Illinois, 
and  that  the  defendant  was  a  citizen  of  the  state  of  Indiana. 
It  further  alleged  that  the  plaintiff  was  a  duly  appointed  trustee 
of  property  situated  in  the  state  by  the  circuit  court  of  Miami 
County,  Indiana.    The  defendant,  City  of  LaFayette,  moved  to 
dismiss  for  want  of  jurisdiction  on  the  ground  that  the  plain- 
tiff, though  actually  residing-  in  Illinois  was  to  be  deemed  a 
citizen   of    Indiana,   because  he   was  appointed  trustee   by  an 
Indiana  court,  and  sued  in  his  trust  capacity   for  damage  to 
trust  property  situated  in  that  state.     Assuming,  without  de- 
ciding, that  the  jurisdiction  of  the  court  may  be  challenged  by 
motion,  as  well  as  by  plea  or  answer,^'''  the  court  disposed  of 
the  question  of  jurisdiction  on  its  merits.     Section  29(88,  Rev. 
St.   Ind.,  which  provides  that  "it   shall  be  unlawful   for  any 
person,  association  or  corporation  to  nominate  or  appoint  any 
person  a  trustee  in  any  deed,  mortgage,  or  other  instrument  in 
writing,  except  wills,  for  any  purpose  whatever,  who  shall  not 
be  at  the  time  a  bona  fide  resident  of  the  state  to  act  as  such 
trustee"    is    in   conflict   with   the    Constitution    of   the    United 
States,  Article  4,  Section  2  which  declares  that  the  citizens  of 
each  state  shall  be  entitled  to  all  the  privileges  and  immunities 
of  citizens  on  the  several  states.^® 

The  statute  of  Indiana,  which  sought  to  make  it  unlawful 
for  a  citizen  of  another  state  to  act  as  trustee  in  that  state,  being 
unconstitutional  and  void,  the  question  of  jurisdiction  had  to 
be  settled  by  determining  whether  the  citizenship  of  the  plaintiff 

37  McDonald      v.      Flour-Mills  Ind.  14.5,  25  N.  E.  807;   Robey  v. 

Co.,  31  Fed.  577;  Sharon  v.  Hill,  Smith,  lud.  Sup.  30  N.  E.  1093; 

23  Fed.  353.  Farmers'    Loan    &    Trust    Co.    v. 

38Bruant    v.    Richardson,    126  C.  &  A.  Ry.  Co.,  27  Fed.  146. 


136  Trusts  for  Business  Purposes. 

for  the  purposes  of  jurisdiction  was  afifected  by  the  fact  of 
his  appointment  as  trustee  by  an  Indiana  court  for  property 
situated  in  the  state.  In  Rice  v.  Houston,^®  it  is  held  that  one 
appointed  administrator  may  become  a  citizen  of  another  state, 
and  after  such  change  of  citizenship  he  may  sue  in  the  federal 
court.  In  New  Orleans  v.  Whitney,*''  the  court  says :  "We 
have  repeatedly  held  that  representatives  may  stand  upon  their 
own  citizenship  in  the  federal  courts  irrespective  of  the  citizen- 
ship of  the  persons  whom  they  represent — such  as  executors, 
administrators,  guardians,  trustees,  receivers,"  etc.  To  the 
same  effect  is  the  case  of  Harper  v.  Railroad  Company  ;*^  text 
writers  on  Practice  in  the  federal  courts  state  the  rule  of  law 
in  the  same  way.**  The  motion  was  held  groundless  and  was 
overruled.  The  court,  in  dismissing  the  motion  of  the  City  of 
LaFayette,  unequivocally  held  that  Shirk,  a  trustee  residing  in 
Illinois,  could,  as  trustee,  maintain  action  at  law  the  same  as 
any  citizen  under  the  constitution  of  the  United  States. 

39  13   Wall.  66.  41  36  Fed.  102. 

40  138  U.  S.  595  (page  606),  11  42  Fost.  Fed.  Pr.  Sec.  19  Story, 
Sup.  Ct.  Rep.  428  (page  431).            Fed.  Pr.  Sec.  19. 


CHAPTER  VII. 
BENEFICIARIES  OR  SHAREHOLDERS. 

75 — '^'VIio  May  Be. 

It  is  an  established  rule  of  law  that  shareholders  or  benefi- 
ciaries are  essential  to  the  formation  of  a  trust.  It  is  not  nec- 
essary to  name  them  in  the  instrument,  but  they  must  be  desig- 
nated or  described  so  they  may  be  identified.  The  shareholders 
are  the  owners  of  the  trust  property  and  their  individual  rights 
and  interests  may  be  evidenced  by  certificates  showing  the  exact 
amount  each  beneficiary  is  entitled  to ;  there  are  no  limitations 
as  to  who  may  be  sliareholders.  Any  shareholder  having  an 
interest  in  the  trust  or  the  trust  property  has  a  right  to  insist, 
in  proper  proceeding,  that  the  trust  shall  be  maintained  and 
executed  according  to  the  terms  of  the  trust.*'  At  law  the 
trustees  are  considered  the  owners  of  the  trust  property,  yet 
in  a  court  of  equity  the  shareholders  are  the  absolute  owners, 
the  trustees  taking  only  sufficient  title  to  discharge  the  trust.** 
When  the  relation  of  trustee  and  cestui  que  trust  is  once  estab- 
lished, no  subsequent  dealing  with  the  trust  property  by  the 
trustee  can  alter  the  relation  of  the  parties.*^ 

76 — Rights  in  General. 

The  word  trustee  signifies  a  fiduciary  capacity ;  it  is  a  repre- 
sentative term  and  indicates  a  relationship  to  others,  namely — 

43  Hill  V.  Hill,  Okla.  152  Pac.      567,  64  South  960. 

1122.  45  Cox  V.   Cox,  95   Va.   173,   27 

44  Ex    Parte    Jones,    186    Ala.      S.  E.  834. 

(137) 


138  Trusts  for  Business  Purposes. 

[BINGHA3I    V.    GRAHAM.] 

beneficiaries.  The  trustees  are  the  masters  of  the  trust  prop- 
erty, but  they  are  Hmited  in  their  authority  and  action  in  the 
enforcement  of  the  trust  by  the  interests  and  welfare  of  the 
beneficiaries.  While  the  shareholders  cannot  dominate  the 
trustees  as  such,  they  are  entitled  to  know  at  all  times  what  is 
being  done  with  the  trust  property;  they  have  rights  in  the 
trust  estate  which  may  be  enforced  in  a  court  of  equity.  One 
of  the  leading  cases  in  which  the  shareholders  called  the  trustees 
to  account  and  enforced  their  rights  is  Bingham  v.  Graham.*^ 
In  this  case  the  beneficiaries  were  dissatisfied  with  the  reports 
and  action  of  the  trustees,  so  they  filed  a  bill  setting  forth  their 
grievances  and  asked  for  a  receiver,  which  was  granted.  The 
procedure  and  action  was  sustained  by  the  Supreme  Court  of 
Texas ;  the  case,  as  reported,  is  in  the  main,  as  follows : 

Appellee  Graham,  joined  by  79  other  parties,  some  of  them 
nonresidents  of  the  state,  as  plaintiffs,  filed  their  petition  in 
the  district  court  of  Dallam  county  against  G.  E.  Martin.  W. 
A.  Poole,  J.  L.  Allred,  and  B.  N.  Richards,  trustees  of  the 
Texline-Burk  Oil  Company,  a  joint-stock  association,  joining 
as  defendants  C.  S.  Bingham,  E.  L.  IMcCullough,  G.  F.  Ward, 
T.  J.  Fletcher,  W.  E.  Dyche,  and  Dallam  County  Bank  of 
Texline,  a  joint-stock  association.  They  prayed  for  the  ap- 
pointment of  a  receiver,  without  notice,  of  all  the  property  of 
the  Texline-Burk  Oil  Company;  that  citation  issue  to  each  of 
the  defendants;  that  upon  a  final  hearing  an  accounting  be 
had;  that  judgment  be  rendered  in  favor  of  plaintiffs  for  the 
use  and  benefit  of  themselves  and  other  interested  shareholders 
who  might  intervene  for  all  sums  of  money  misappropriated 
by  the  trustees  of  the  association  or  other  named  defendants, 
requiring  them  to  pay  the  same  into  court;  for  a  judgment 

46  (Tex.),  220  S.  W.  105. 


Be;ne;ficiaries  or  SharehoIvDErs.  139 

[BINGHAM   V.    GKAIL.A3I.] 

against  the  defendants  Bingham  and  Poole  for  any  amount  of 
profits  illegally  charged  the  association  on  the  oil  and  gas  lease 
referred  to;  that  a  judgment  be  rendered  in  favor  of  plaintiffs, 
or  so  many  of  them  as  purchased  any  of  the  illegal  increased 
capital  stock,  and  against  the  organizers,  for  the  respective 
amounts  paid  for  such  stock ;  that  the  deed  of  trust  lien  be 
canceled;  that  the  holder  or  holders  of  certain  notes,  if  de- 
fendants, be  required  to  cancel  and  surrender  said  notes;  and 
for  such  other  and  further  relief,  in  law  and  equity. 

"jy — Wrongs  to  Beneficiaries  May  be  Presented  to  the  Court 
by  Petition. 

The  petition  alleged,  in  substance,  that  on  or  about  the  19th 
day  of  October,  1918,  C.  S.  Bingham,  W.  A.  Poole,  E.  L. 
McCullough,  J.  L.  Allred,  G.  E.  Martin,  G.  F.  Ward,  and 
W.  R.  Dyche  formed  a  joint-stock  association,  adopting  the 
name  of  Texline-Burke  Oil  Company;  that  the  board  of  trus- 
tees elected  defendant  Bingham  as  president,  defendant 
McCullough  as  secretary,  and  defendant  Poole  as  the  treas- 
urer, which  offices  they  still  hold ;  that  plaintiff's  are  the  holders 
of  more  than  200  shares  in  said  joint-stock  association,  and  as 
such  sue  for  the  use  and  benefit  of  themselves  and  such  other 
shareholders  as  have  bought  and  paid  for  their  stock  in  the 
association;  that  thereafter,  on  and  before  the  ist  day  of 
January,  19 19,  the  defendants  (other  than  the  defendants 
Richards  and  the  Dallam  County  Banlv)  offered  for  sale  and 
sold  shares  in  the  association  at  the  par  value  of  $50,  200  of 
said  shares  being  purchased  and  paid  for  by  plaintiff  who  sold 
certificates  of  stock  issued  by  said  officers ;  that  as  said  shares 
were  sold  by  the  defendants  they  issued  a  written  contract 
signed  by  said  officers  (other  than  the  defendants  Richards  and 


140  Trusts  for  Business  Purposes. 

[BINGHAM   V.   GBAHA3I.] 

said  bank),  wherein  and  whereby  they  represented  to  all  pur- 
chasers of  stock  that  said  association  had  a  capital  stock  of 
$60,000 ;  that  it  owned  an  oil  and  gas  lease  of  2J/2  acres  out  of 
the  southeast  corner  of  the  50-acre  tract  of  the  Du  Bose  survey, 
in  the  Burkburnett  oil  field,  in  Wichita  county,  Tex.,  and  con- 
tracted and  agreed  to  and  with  said  purchasers  of  stock  that  the 
association  would  begin  an  oil  well  as  soon  as  the  capital  stock 
was  placed,  said  well  to  be  drilled  to  what  is  known  as  the 
Fowler  sand,  unless  oil  or  gas  was  found  in  paying  quantities 
at  a  lesser  depth,  said  well  to  be  drilled,  equipped  and  together 
with  said  lease  to  be  delivered  to  the  stockholders. 

It  was  further  alleged  that,  after  selling  and  disposing  of 
the  capital  stock  and  receiving  the  $60,000  therefor,  the  trustees 
failed  and  refused  to  carry  out  their  duties  as  provided  in  the 
articles  of  association,  and  to  drill  or  cause  to  be  drilled  a  well 
of  any  kind  on  said  2^-acre  tract;  that,  contrary  to  and  in 
violation  of  the  articles  of  the  association,  the  defendants 
sought  to  increase  the  capital  stock,  and  did  about  the  month 
of  February,  1919,  increase  the  capital  stock  $7,000,  and  there- 
after sold  such  increased  capital  stock,  issuing  certificates  to 
the  purchasers  thereof  in  due  form;  that,  if  any  attempt  was 
made  to  increase  the  capital  stock,  it  was  without  notice  to  or 
knowledge  of  the  stockholders  and  in  violation  of  the  rules  and 
regulations  of  the  association,  and  such  increase  and  issue  of 
certificates  was  void,  except  that  the  money  received  by  de- 
fendants for  such  increased  capital  stock  created  outstanding 
indebtedness  against  the  association  to  that  extent;  that  the 
trustees  fraudulently  misappropriated  the  funds  of  the  associa- 
tion to  the  amount  of  $3,500  in  acquiring  from  the  defendants 
Bingham  and  Poole  a  lease  on  1^4  acres  of  land  in  Wichita 
county,  said  lease  being  executed  May  i,  1919,  and  that  said 
misappropriation  was  in  violation  of  section  i,  art.  2,  of  the 


Beneficiaries  or  Shareholders.  141 

[BINGHAM   \.    GRAHAM.] 

articles  of  association,  for  which  said  trustees  are  personally 
liable  to  plaintiffs  and  other  shareholders ;  that  they  also  mis- 
appropriated a  large  sum  of  money  of  the  association,  in  that 
they  fraudulently  caused  a  well  to  be  drilled  on  said  1^4  acres 
of  land,  wdiich  well  was  completed  during  the  month  of  April, 
1919;  that  said  well  was  drilled  on  said  land  with  the  funds 
of  the  association  prior  to  the  time  the  trustees  had  acquired 
any  written  lease  of  the  property  and  while  the  title  was  in 
other  persons  than  the  trustees;  that  they  acquired  said  land 
from  Bingliam  and  Poole,  who  were  then  officers  of  the  asso- 
ciation, through  a  conspiracy  on  the  part  of  said  Bingham  and 
Poole  and  said  trustees,  paying  them  and  other  defendants  who 
were  interested  in  the  lease  a  profit  of  at  least  $10,000,  al- 
though Bingham  and  Poole  did  not  have  at  any  time  any  in- 
dividual funds,  but  had  purchased  the  land  upon  the  credit  of 
and  with  funds  belonging  to  the  association,  and  fraudulently 
acquired  the  title  thereto  in  their  individual  names,  and  imme- 
diately thereafter  transferred  the  same  to  the  association. 

78 — Beneficiaries  Entitled  to  Information  from  Trustees. 

It  was  further  alleged  that,  although  repeated  demands  were 
made  on  the  trustees  and  officers  for  a  financial  statement  as 
to  the  condition  of  the  association  and  of  the  receipts  and  dis- 
bursements made  by  the  trustees  and  officers — said  demands 
having  been  first  made  about  May  i,  19 19,  and  continued  and 
repeated  to  the  present  time — they  have  failed  and  refused  to 
furnish  a  financial  statement  or  to  inform  plaintiff's  or  other 
stockholders  as  to  receipts  and  disbursements,  or  to  make  any 
report  as  to  the  condition  of  the  affairs  of  the  association,  show- 
ing its  assets  and  liabilities,  save  and  except  that  they  pre- 
pared and  mailed  to  the  shareholders  a  printed  letter  about  the 


142  Trusts  for  Business  Purposes. 

[BINGHAM   V.    GRAHAM.] 

loth  day  of  June,  1919,  in  which  they  stated  that  the  first  well 
had  been  completed ;  that  it  was  not  producing  as  much  as  they 
anticipated,  but  the  pipe  line  receipts  showed  its  production  to 
be  approximately  30  barrels  of  oil  daily.  Said  letter  further 
stated  that  they  had  a  contract  with  the  company  to  take  the 
casing  head  gas  which  would  yield  some  income  and  would 
have  a  tendency  to  increase  the  production  of  oil ;  that  they 
were  in  communication  with  a  contractor  to  drill  one  or  more 
wells  on  the  west  2}4-acre  lease  and  promised  to  keep  the  stock- 
holders advised  of  any  action  taken  by  the  trustees  in  that  re- 
gard. It  was  further  stated  in  the  letter  that  the  expenses 
were  heavy,  that  there  would  be  no  dividends  available  for  a 
few  months,  but  that  they  were  operating  as  economically  as 
possible. 

It  was  further  alleged  that  on  or  about  the  nth  day  of  June, 
1919,  56  of  the  shareholders  presented  to  the  defendants  a  writ- 
ten statement  requesting  the  following  information : 

(i)  A  statement  of  the  stock  issued  and  paid  for  in  said 
association. 

(2)  The  net  proceeds  from  the  sale  of  said  stock  paid  into 
the  association. 

(3)  An  itemized  accounting  of  the  expenditures  of  said 
association  to  the  ist  day  of  June,  19 19. 

(4)  An  itemized  statement  of  the  proximate  cost  of  the 
maintenance  of  the  well  and  any  overhead  expenses,  such  as 
salaries. 

(5)  A  statement  as  to  the  number  of  barrels  of  oil  pumped 
to  June  15,  1919,  and  the  date  from  which  production  started, 
the  price  at  which  said  oil  was  being  marketed,  and  the  name 
of  the  pipe  line  company  to  which  it  was  being  furnished. 

(6)  A  general  financial  statement  of  the  association  to 
June  I,  1919,  showing  all  assets  and  liabilities. 


BE:Ni;FiciARiEs  OR  Share:hoi.de;rs.  143 

[BINGHAM    V.    GRAHA3I.] 

(7)  The  names  of  the  officers  receiving  and  disbursing  the 
funds  and  whether  or  not  said  officers  are  under  bond." 

In  said  written  request  it  was  suggested  that  said  statement 
be  either  pubhshed  or  filed  with  the  secretary  so  as  to  be  avail- 
able for  inspection  by  all  parties  interested  on  or  before  the 
1st  day  of  July,  1919. 

79 — Where  Fraud,  Bad  Faith   or  Mismanagement  is  Shoivn, 
Shareholders  May  Ask  For  a  Receiver. 

It  was  further  charged  that  the  officers  and  trustees  wholly 
failed  and  refused  to  furnish  any  kind  or  character  of  informa- 
tion as  requested  by  said  writing ;  tliat  although  the  well  on 
said  i^-acre  tract  was  completed  during  the  last  days  of 
April,  1919;  and  was  producing  continuously  since  said  date, 
no  dividends  were  declared  nor  any  information  imparted  to  the 
stockholders ;  that  said  trustees  incurred  an  indebtedness  in  ex- 
cess of  $10,000  over  and  above  the  receipts  of  said  association 
and  in  addition  to  the  funds  that  said  company  so  misappropri- 
ated as  hereinbefore  alleged ;  that  said  well,  instead  of  being 
revenue-producing,  had  been  so  mismanaged  by  the  trustees  as 
to  be  a  loss  and  an  expense  rather  than  an  asset ;  that  said 
trustees  were  each  and  all  insolvent ;  that  on  or  about  the  23d 
day  of  June,  1919,  they  executed  a  fictitious  note  to  the  defend- 
ant Dallam  County  Bank  in  the  sum  of  $9997.32,  due  one  day 
after  date,  bearing  interest  at  the  rate  of  8  per  cent,  per  annum 
from  date,  and  at  the  same  time  executed  to  B.  N.  Richards, 
as  trustee,  a  deed  of  trust  conveying  the  said  oil  and  gas  lease 
and  all  the  personal  property,  efifects,  tools,  goods,  wares,  and 
merchandise  belonging  to  the  association  for  the  purpose  of 
securing  payment  of  said  note;  that  said  note  and  mortgage 
were  executed  for  the  fraudulent  purpose  of  enabling  the  bank 


144  Trusts  for  Business  Purposes. 

IBIXGHAM   V.    GRAHA^L] 

and  Richards  to  dispose  summarily  of  all  the  assets  of  said 
association  and  deprive  the  stockholders  thereof ;  that  the 
makers  of  the  deed  of  trust  and  tlie  defendant  bank  all  well 
knew  and  were  informed  at  the  time  of  the  execution  of  the 
note  that  the  association  was  insolvent ;  that  the  proceeds  from 
the  well  were  little  more  than  sufficient  to  pay  the  cost  of  oper- 
ating the  same  in  the  manner  in  which  it  was  being  done,  and 
that  there  was  no  possibility  that  the  association  or  trustees 
would  have  any  funds  with  which  to  discharge  the  note  due 
one  day  after  date ;  that  plaintiffs  were  informed  that  the  mort- 
gaged property  was  being  offered  for  sale  under  the  deed  of 
trust,  and,  unless  restrained,  it  would  be  sold  without  notice  to 
the  shareholders  and  the  money  applied  to  the  payment  of  said 
fictitious  note ;  that  the  association  had  never  at  any  time  really 
been  indebted  to  said  bank,  and,  unless  prevented,  said  bank 
would  acquire  title  to  and  possession  of  all  the  property  and 
eft'ects  of  the  association  ;  that  said  trustees  have  not  at  any  time 
given  the  duties  incumbent  upon  them  their  personal  attention, 
but  that  they  placed  the  drilling  of  the  well  in  charge  of  a  per- 
son known  to  them  to  be  unworthy  of  the  trust  and  turned  over 
to  him  large  sums  of  money,  without  exacting  a  bond  or  other 
security  from  him;  that  the  said  person  shortly  thereafter  ab- 
sconded with  about  $2,000  of  the  funds  of  the  association, 
which  has  never  been  recovered  nor  refunded  nor  any  part 
thereof ;  that  after  said  well  began  to  produce  oil  they  placed 
the  same  in  charge  of  a  person  wholly  inexperienced  with  such 
work,  all  to  the  great  loss  of  the  shareholders,  and  that  they 
were  paying  such  person  a  large  salary  for  his  services;  that, 
although  they  made  diligent  effort  by  repeated  requests  to  be 
furnished  with  a  list  of  all  the  stockholders,  the  officers  and 
trustees  failed  and  refused  to  give  them  such  information ;  that 
plaintiffs  further  requested  and  demanded  that  the  books  show- 


Beneficiaries  or  Shareholders.  145 

[BINGHAM   V.    GRAHAM.] 

ing  the  shares,  interests,  and  amount  of  stock  sold  and  issued 
and  the  books  showing  the  receipts  and  disbursements  of  the 
company  be  exhibited  to  them,  and  such  requests  have  been 
refused;  that  the  treasurer  heretofore  informed  and  advised 
these  plaintififs  that  he  had  never  been  furnished  with  any  kind 
or  character  of  books  of  accounts,  or  handled  any  of  the  funds 
received  by  or  paid  out  by  the  trustees,  and  that  he  knew 
nothing  concerning  the  receipts  and  disbursements. 

Plaintiffs  charge  that  the  defendant  Bingham  has  in  his  cus- 
tody and  possession  the  books,  accounts  and  records  of  the 
association,  and  although  demand  was  made  upon  him  in  person 
to  exhibit  the  same  to  plaintiffs,  he  has  failed  and  refused  and 
still  fails  and  refuses  to  exhibit  the  same  to  them.  Plaintiffs 
charge  upon  information  and  allege  the  facts  to  be  that  the 
trustees  are  now  seeking  to  sell  and  dispose  of  all  the  property 
by  alleged  authority  of  the  articles  of  the  association,  and,  if 
permitted  to  do  so,  they  will  sell  the  same  at  a  price  far  below 
its  market  value;  that  the  trustees  are  wholly  insolvent,  as  all 
of  the  assets  of  the  association  have  been  dissipated,  save  and 
except  the  property  covered  by  the  deed  of  trust,  and  all  of  the 
assets  on  hand  out  of  which  the  plaintiffs  have  any  present 
hope  of  receiving  any  portion  of  the  funds  consist  of  the  pro- 
ceeds of  said  assets,  save  and  except  such  amounts  as  they 
may  be  able  to  recover  from  the  defendants ;  that  the  oil  from 
said  well  is  being  pumped  from  day  to  day  by  the  Greater  Texas 
Company,  at  an  agreed  price  unknown  to  plaintiffs,  and  that 
the  party  in  charge  of  the  well  is  failing  and  refusing  to  pay 
said  company  for  its  services  rendered  in  pumping  the  oil 
from  said  well,  in  consequence  of  which  the  Greater  Texas 
Company  is  now  threatening  to  take  immediate  possession  of 
the  well,  tools,  tanks,  and  other  assets  of  the  association,  and 
that  the  trustees  will  not  seek  to  prevent  the  same,  and  if  they 


146  Trusts  for  Business  Purposes. 

[BINGHAM   V.    GRAHAM.] 

do  the  said  company  will  at  once  institute  suit  and  levy  court 
process  upon  all  of  said  property  and  subject  the  same  to  the 
payment  of  their  debt;  that  the  said  trustees  have  long  since 
abandoned  the  direct  management,  supervision,  or  control  of 
the  affairs  of  the  company,  and  have  left  the  same  in  the  hands 
of  a  wholly  inexperienced  person,  to  the  great  detriment  of 
the  shareholders;  that  said  trustees  are  now  offering  for  sale 
and  may  sell  and  dispose  of  the  said  property  before  they  could 
be  properly  restrained  by  writ  of  injunction,  for  the  reason  that 
part  of  them  are  in  the  Burkburnett  oil  fields,  a  place  where  it 
is  almost  impossible  to  reach  a  person  by  court  process  of  any 
kind  promptly  served  upon  them ;  that  the  trustees,  defendants 
herein,  being  personally  insolvent,  and  having  spent,  wasted, 
misappropriated  and  dissipated  all  of  the  funds  of  the  associa- 
tion, and  having  incurred  very  very  large  indebtedness,  and 
there  being  on  hand  but  a  small  amount  of  assets  out  of  which 
claims  can  be  paid,  it  is  of  great  importance  that  as  much  of 
same  be  saved  as  possible;  that  because  said  defendants  may 
not  have  properly  placed  the  title  to  the  above-described  real 
estate  as  required  by  the  articles  of  the  association,  although 
it  was  paid  for  with  the  funds  of  the  shareholders,  it  is  essential 
that  a  receiver  be  appointed  to  take  charge  of  the  same,  prevent 
its  alienation,  and  hold  it  for  the  benefit  of  the  plaintiffs;  that 
others  of  the  defendants  than  the  trustees  are  now  in  the  oil 
fields  and  in  and  about  Burkburnett  and  Electra,  their  where- 
abouts being  unknown,  and  cannot  be  reached  by  the  ordinary 
process  of  law,  so  as  to  give  them  proper  notice  of  this  action 
within  a  reasonable  time. 

80 — Procedure  in  Appointment  of  Receiver. 

The  first  question  to  be  considered   is   raised  by  the  fifth 
proposition  in  the  appellant's  brief,  by  which  it  is  asserted  that 


Beneficiaries  or  Shareholders.  147 

[BINGHAM    V.    GRAHAM.] 

the  appointment  is  void  for  the  reason  that  it  was  made  be- 
fore the  petition  was  filed  and  the  suit  instituted.  It  appears 
from  the  record  tliat  the  petition  was  filed  with  the  clerk  of  the 
district  court  of  Dallam  county  July  18,  1919.  The  order  ap- 
pointing the  receiver  bears  the  same  date,  and  there  is  nothing 
in  the  record  to  show  that  the  order  was  made  before  the  peti- 
tion was  filed.  The  rule  is,  as  contended  for  by  appellant,  that 
the  court  has  no  right  to  appoint  a  receiver  prior  to  the  institu- 
tion of  the  suit.*''^  Accompanying  the  record  is  an  affidavit 
made  by  the  clerk  of  the  district  court  of  Dallam  county  in 
which  he  states  that  at  the  time  the  petition  was  filed  with  him 
on  the  i8th  day  of  July  the  district  judge  had  attached  to  and 
affixed  to  the  petition  his  order  and  fiat  appointing  J.  N.  Cole 
as  receiver  of  the  Texline-Burk  Oil  Company.  If  this  affidavit 
related  to  or  affected  the  jurisdiction  of  this  court,  it  could  be 
considered,  but  since  it  goes  to  the  jurisdiction  of  the  trial 
court  only,  we  cannot  consider  it.  Courts  of  Civil  Appeals 
will  not  hear  evidence  outside  the  record  tending  to  show  want 
of  jurisdiction  in  the  lower  court.*^  Such  being  the  state  of  the 
record,  the  presumption  of  the  legality  and  regularity  of  official 
acts  and  that  the  proceedings  of  the  trial  court  are  regular  and 
legal  obtains,  and  this  contention  must  be  overruled. 

The  next  proposition  urged  and  to  be  considered  is  that,  be- 
cause the  Texline-Burk  Oil  Company  was  not  eo  nomine  made 
a  party  to  the  suit,  the  court  had  no  authority  to  appoint  a  re- 
ceiver for  the  property.  While  the  proposition  states  the  gen- 
eral rule,  it  should  not  be  enforced  here  by  reason  of  the  broad 

47  Webb  V.  Allen,  15  Tex.  Civ.  48  Poole   v.   Mueller,   30    S.   W. 

App.  605,  40  S.  W.  342;    Howell  951,    (Tex.   Civ.   App.);    T.   &  P. 

V.  Harris-Cortner  &  Co.,  168  Ala.  Ry.    Co.    v.    Hood,    59    Tex.    Civ. 

383,    52    South    935;    Ann.    Cas.  App.  363,  125  S.  W.  982. 
1912B,  236,  and  note. 


148  Trusts  for  Business  Purposes. 

[BINGHAM   V.   GRAHAM.] 

powers  vested  in  the  trustees  by  the  signed  articles.  The  effect 
of  V.  S.  C.  S.  arts.  6149-61 54,  is  to  give  the  association  a  legal 
entity,  distinct  from  its  members,  but  the  language  of  the  statute 
is  that  such  an  association  may  sue  or  be  sued  in  its  distinctive 
name,  but  the  last-named  article  provides  that  the  chapter  is 
merely  cumulative  to  other  remedies  now  existing  under  the 
law,  and,  even  if  it  should  be  applied  to  suits  instituted  by 
shareholders  against  the  officers  or  trustees  of  such  an  associa- 
tion, under  the  authorities  as  we  understand  them,  the  plain- 
tiffs in  such  suit  are  not  required  to  make  the  association  as 
such  a  party.  Admitting  that  the  association  has  an  entity  sep- 
arate from  its  members,  it  is  in  this  case,  according  to  the  al- 
legations of  the  petition,  only  a  name,  and  at  most  the  associa- 
tion is  a  beneficiary,  not  as  a  separate  entity,  but  in  the  sense 
that  it  includes  its  stockholders  who  are  the  real  cestuis  que 
trustent.  We  were  mistaken  in  the  original  opinion  in  stating 
that  no  association  had  ever  been  formed.  Taking  the  allega- 
tions of  the  petition  as  true,  the  articles  of  association  were 
sufficient  to  create  the  association. 

81 — Officers  May  be  Elected  by  the  Trustees. 

The  petition  affirmatively  alleges  the  formation  of  a  joint- 
stock  association,  and  further,  that  those  who  promoted  it  and 
signed  the  articles  vested  the  management  of  all  the  affairs  of 
the  association  in  a  named  board  of  trustees  and  their  suc- 
cessors; said  board  having  the  power  to  elect  a  president,  vice 
president,  secretary,  and  treasurer,  and  to  create  such  offices 
as  the  board  may  deem  proper,  filling  them  by  appointment. 
The  instrument  further  vests  the  title  to  all  property  acquired 
or  to  be  acquired  by  the  company  in  such  trustees  as  joint  ten- 
ants under  a  declaration  of  trust.    The  trustees  have  full  power 


Beneficiaries  or  Shareholders.  149 

[BINGHAM   V.    GRAHAM.] 

and  authority,  upon  a  vote  of  a  majority  of  the  board,  to  con- 
duct the  business  of  the  company,  make  necessary  repairs, 
borrow  money  upon  such  terms  as  they  may  deem  proper,  and 
to  do  and  perform  all  things  which  in  their  judgment  may  be 
necessary  in  the  management  and  conduct  of  the  business. 
Their  authority  is  limited  only  in  that  they  are  not  to  use  the 
funds  to  secure  oil  and  gas  leases  except  as  provided  in  article  2. 
In  short,  the  articles  of  association  substitute  the  trustees  for 
officers,  and  confer  upon  them  all  the  power  ami  authority 
which  are  generally  vested  in  the  officers  of  such  associations. 
It  must  be  presumed  from  this  statement  of  the  powers  con- 
ferred upon  the  trustees,  limited  only  in  the  matter  specified, 
that  they  were  authorized  to  prosecute  and  defend  suits  in 
their  own  names. 

82 — Shareholders  May  Sue  for  Themselves  and  Others. 

The  plaintififs,  holding  200  shares  of  the  stock,  sue  for  them- 
selves and  for  the  use  and  benefit  of  all  other  shareholders  who 
have  bought  and  paid  for  their  shares  of  stock.  They  excuse 
their  failure  to  make  all  shareholders  parties  by  the  allegation 
that  they  have  been  denied  the  right  to  inspect  the  books  and 
records,  and  that  the  defendants  refuse  to  furnish  them  a  list  of 
shareholders.  While  this  would  not  be  an  excuse  for  failinsr 
to  make  the  association  itself  a  party,  the  law  relieves  them  of 
that  duty  when  it  is  shown  that  the  trustees,  by  virtue  of  their 
office,  may  sue  and  be  sued.  A  recovery  under  such  circum- 
stances would  be  for  the  benefit  of  the  association  and  all 
stockholders  not  parties,  and  a  judgment  in  such  an  action 
would  be  res  judicata  of  all  matters  litigated.*^  Nothing  more 
than  a  technical  reason  is  shown  for  making  the  association  a 

49  Canadian  C.  v.  Johnson,  176    S.  W.  835  (Tex.  Civ.  App.). 


150  Trusts  for  Business  Purposes. 

[BINGHAM    V.    GRAHAM.] 

party  to  the  suit.  It  has  committed  no  wrong,  and  indeed  it  is 
difficuh  to  see  how  it  could  do  so  separate  and  apart  from  the 
trustees.  As  shown  by  th^  petition,  the  legal  title  to  the  prop- 
erty is  in  the  board,  and  not  in  the  association.  The  equitable 
title  is  in  the  stockholders  and  the  association.  No  effort  is 
made  to  dissolve  the  association,  to  dispose  of  its  property,  or 
wind  up  its  affairs. 

In  a  matter  before  the  court  of  this  state,*^^  where  the  lega- 
tee under  a  will  sued  the  executor  of  the  will  who  had  conveyed 
land  to  a  joint-stock  company,  joining  as  defendants  in  the  suit 
only  the  trustees  of  the  company,  the  instrument  there,  as  in 
this  case,  vested  in  the  company  the  legal  title  to  the  land  in 
certain  trustees  and  conferred  upon  them,  as  in  this  case,  com- 
pleted power  over  the  property,  including  the  right  to  convey 
it.  Neither  the  company  nor  the  stockholders  were  made  par- 
ties. Exception  was  urged  to  the  petition  upon  the  ground 
of  misjoinder  in  faihng  to  make  the  stockholders  parties.  No 
objection  was  made  because  the  company,  as  such,  had  not 
been  made  a  party,  but  the  disposition  made  of  the  demurrer 
and  the  language  used  in  overruling  it  is  applicable  here.  Quot- 
ing from  Kerrison  v.  Stewart,^^  the  court  said : 

"It  cannot  be  doubted  that  under  some  circumstances  a  trus- 
tee may  represent  his  beneficiaries  in  all  things  relating  to  their 
common  interest  in  the  trust  property.  He  may  be  invested 
with  such  powers  and  subjected  to  such  obligations  that  those 
for  whom  he  holds  will  be  bound  by  what  is  done  against  him, 
as  well  as  what  is  done  by  him.  The  difffculty  lies  in  ascer- 
taining whether  he  occupies  such  a  position,  not  in  determining 
its  effect  if  he  does.    If  he  has  been  made  such  representative, 

49i  Anderson   v.    Stockdale,    62  50  93  U.  S.  160,  23  L.  Ed.  843. 

Tex.  54. 


Be;ne;f'iciarii;s  or  Shareholders.  151 

[BINGHAM   V.    GRAHAM.] 

it  is  well  settled  that  his  beneficiaries  are  not  necessary  parties 
to  a  suit  by  him  against  a  stranger  to  enforce  the  trust  *  *  * 
or  to  one  by  a  stranger  against  him  to  defeat  it  in  whole  or  in 
part.  *  *  *  In  such  cases  the  trustee  is  in  court  for  and  on 
behalf  of  the  beneficiaries;  and  they,  though  not  parties,  are 
bound  by  the  judgment,  unless  it  is  impeached  for  fraud  or 
collusion  between  him  and  the  adverse  party.  *  *  *  Here 
the  trustees  came  within  that  principle,  and  it  was  not  neces- 
sary to  make  the  stockholders  parties  to  the  suit." 

This  is  not  an  action  by  a  third  party,  but,  as  shown  by  the 
petition,  the  plaintiffs  and  named  defendants  are  all  stock- 
holders, and  for  a  stronger  reason  the  doctrine  announced  ap- 
plies to  this  case.  That  the  trustees  would  have  the  right  in 
their  own  name  to  sue  as  individual  stockholders  to  recover  the 
amounts  subscribed  by  them  will  not  be  questioned.  If,  under 
their  powers,  they  can  institute  such  a  suit  either  in  their  own 
names  or  in  the  name  of  the  association,  we  think  the  reverse 
of  the  rule  unquestionably  applies.  The  case  as  made  by  the 
pleadings  is  one  in  which  the  defendants,  trustees,  are  sued  by 
some  of  the  beneficiaries,  alleging  insolvency  of  the  trustees, 
breach  of  trust,  misconduct,  misapplication  of  trust  funds,  use 
of  their  authority  as  trustees  of  the  fund  for  their  own  personal 
profit,  refusal  to  account  for  and  pay  over  income,  fraud  in 
executing  a  fictitious  note  and  mortgage,  loss  of  trust  funds 
through  employment  of  irresponsible  parties  selected  by  them 
to  perform  the  very  duties  imposed  upon  them  by  the  articles 
for  personal  execution,  alleging  danger  of  further  loss  by 
reason  of  negligence  and  carelessness,  and  we  think  the  rules 
governing  in  cases  of  trust  and  the  appointment  for  receivers 
for  trust  estates  applies.     City  of  Austin  v.  Cahill,^^  is  a  case 

6199   Tex,    172,   88    S.   W.   542,  89  S.  W.  552. 


152  Trusts  for  Business  Purposes. 

[BINGHAM   V.    GRAHAM.] 

where  the  appellee  sued  the  city,  praying  for  a  mandamus  re- 
quiring it  to  levy  a  tax  for  the  purpose  of  paying  interest  al- 
leged to  be  due  on  certain  bonds  previously  issued  by  the  city. 
The  contention  was  made  that  the  bondholders  who  had  not 
been  made  parties  were  necessary  parties  to  the  action.  The 
Supreme  Court  held  that  the  act  of  the  legislature  which  cre- 
ated the  sinking  fund  made  the  city  a  trustee  for  the  benefit  of 
the  bondholders,  and,  contrary  to  the  general  rule,  it  was  not 
necessary  for  the  latter  to  be  made  parties.  The  opinion  con- 
tains an  exhaustive  review  of  the  authorities.  After  conceding 
the  general  rule  that  cestuis  que  trustent  ought  to  be  made 
parties,  it  said  in  part: 

"To  this  rule  there  are  well-recognized  exceptions,  but  these 
embrace  mainly  that  class  of  cases  where,  by  reason  of  the 
number  of  beneficiaries,  it  is  inconvenient  to  make  them  parties, 
and  where  it  may  be  presumed  that  it  was  the  intention  to  in- 
vest the  trustees  with  power  to  prosecute  and  defend  suits  in 
their  own  names.  An  apt  illustration  of  the  exception  is  found 
in  the  case  of  the  trustees  in  a  mortgage  to  secure  a  series  of 
negotiable  bonds  upon  the  property  of  railroad  companies.^* 
Another  illustration  is  afforded  by  the  case  of  an  assignee  in 
the  deed  of  an  assignment  made  by  an  insolvent  for  the  benefit 
of  his  creditors.^'  The  appointment  of  an  assignee  in  such 
cases  generally  grows  out  of  the  necessity  of  having  some  agent 
to  act  for  beneficiaries,  who  are  usually  too  numerous  to  act 
together.  In  such  case  the  presumption  is  great  that  he  is  their 
representative,  not  only  as  to  the  general  management  of  the 
assets,  but  also  to  prosecute  and  defend  suits  involving  title  to 
the  assigned  estate." 


62  Shaw   V.    Railroad,    5    Gray  53  Kerrison   v.   Stewart,   93   U. 

(Mass.)    162.  S.  155,  23  L.  Ed.  483. 


Beneficiarie;s  or  Shareholde;rs.  153 

[BINGIL\M    V.    GRAHAM.] 

In  the  City  of  Sherman  v.  Wilhams,^*  it  was  developed 
that  a  lot  of  land  had  been  taken  by  the  city  to  meet  a  tax 
collector's  default  as  to  a  special  fund  created  in  the  inter- 
est of  outstanding  bondholders.  A  judgment  creditor  of  the 
city  levied  execution  upon  the  property  and  caused  it  to  be 
advertised  for  sale,  when  the  city  brought  suit  to  enjoin  the 
sale  on  the  ground  that  the  property,  being  held  by  it  for  the 
special  fund  mentioned,  was  not  subject  to  sale  to  satisfy  the 
execution.  The  city,  it  is  apparent,  v/as  acting  in  effect  as 
trustee  for  the  outstanding  bondholders,  but  the  right  of  the 
city  to  maintain  the  suit  was  not  questioned  by  counsel  for  the 
court,  and  the  final  relief  prayed  for  was  granted. 

These  causes  declare  the  equitable  doctrine  of  virtual  repre- 
sentation, under  which  only  parties  must  be  joined  who  fairly 
represent  the  interest  or  right  involved  so  that  the  case  may  be 
tried  fairly  and  honestly. ^^  The  doctrine  of  virtual  representa- 
tion has  been  often  recognized  and  applied  in  cases  of  trusts 
where  those  beneficially  interested  are  represented  by  executors, 
administrators,  assignees  in  bankruptcy,  trustees  in  insolvency, 
conventional  trustees  for  the  benefit  of  creditors  and  re- 
ceivers.^^ Chief  Justice  Marshall  evidently  had  this  rule  in 
mind  in  Hopkirk  v.  Page,  Fed.  Cas.  No.  6697,  he  said : 

"Where  the  legal  interest  of  one  person  is  involved  in  that 
of  another,  and  that  other  possesses  the  legal  right  so  that  the 
interest  may  be  asserted  in  his  name,  it  is  not,  I  think,  always 
necessary  to  bring  both  before  the  court." 

The  doctrine  has  in  many  cases  been  applied  to  members  of 

54  84  Tex.  421,  19  S.  W.  606,  31  S.  E.  21,  6  Ann.  Cas.  403. 
Am.   St.  Rep.  66.  56  Baltimore  v.  United  R.,  etc., 

65  Smith     V.      Swornstadt      16  Co.,  lOS   Md.  71,  69  Atl.  436,  16 

How.  288,  14   L.  Ed.   942;    Graf-  L.  R.  A.   (N.  S.)   1006. 
ton  V.   Holt,   58   W.   Va.    182,   52 


154  Trusts  for  Business  Purposes. 

[BINGHAM    V.    GRAHAM.l 

unincorporated  associations.  Suits  in  equity  may  be  brought 
by  or  against  some  of  the  members  of  the  association  as  repre- 
sentatives of  all  the  members,  especially  where  the  defendants 
in  such  cases  were  managing  officers  or  trustees.^'  The  rule 
has  also  been  applied  in  a  suit  to  enjoin  a  strike  of  laborers 
where  the  court  held  that  it  was  sufficient  to  bring  in  the  leaders 
of  the  strike  to  represent  the  organization,  regardless  of  their 
official  relation  to  their  society.  American  Steel,  etc.,  Co.  v. 
Wire  Drawers'  etc.  Unions,^^  states  the  rule  in  this  language: 

"As  an  exception  to  the  rule  that  all  persons  having  an  in- 
terest in  the  subject-matter  of  an  equity  suit  must  be  made 
parties,  the  doctrine  of  virtual  representation  which  originated 
at  an  early  date  recognizes  the  right  of  a  few  persons  to  sue 
for  themselves  and  all  others  similarly  situated.  Under  this 
doctrine  the  persons  who  are  not  joined  by  name  as  parties  are 
in  a  sense  before  the  court.  They  have  been  called  quasi  par- 
ties and  have  even  been  said  to  be  parties  in  substance  and  legal 
effect.  In  all  cases  to  which  the  doctrine  of  representation  ap- 
plies there  must  be  joined  as  parties  persons  who  fairly  repre- 
sent the  interest  or  right  involved  so  that  it  may  be  tried  fairly 
and  honestly.  It  is  sufficient  if  the  parties  before  the  court 
enable  it  fairly  and  fully  to  adjudicate  the  question  involved. 
The  parties  represented  must  have  a  common  interest  with 
those  before  the  court,  and  consequently  the  parties  before  the 
court  cannot  act  as  representatives,  if  their  interests  are  an- 
tagonistic to  those  who  would  be  represented.  *  *  *  And 
so  a  suit  in  equity  may  be  brought  by  some  of  the  members  of 
the   unincorporated   association   as    representatives   of    all   the 

57  Martin  v.  Dryden,  1  Gilman  ington,  1  Cal.  55. 

(111.)    187;   Whitney  v.  Mayo,  15  58  90  Fed.  598,  20  R.  C.  L.  669, 

111.    251;    Goldman    v.    Page,    59  Sec.   9. 
Miss.  404;  Von  Schmidt  v.  Hunt- 


Beneficiaries  or  Shareholders.  155 

[BINGHAM   V.    GRAHAM.1 

members,  whether  organized  for  pubHc  or  private  purposes, 
and  in  some  of  the  cases  relating  to  the  members  of  such  asso- 
ciations stress  has  been  laid  on  the  fact  that  the  members  are 
numerous.  The  doctrine  of  representation  has  also  been  recog- 
nized in  cases  of  trusts,  so  that  persons  beneficially  interested 
are  considered  as  represented  by  one  occupying  a  trtist  rela- 
tion, especially  when  the  cestuis  que  trust  are  numerous  so 
that  it  would  be  impracticable  to  bring  all  of  them  before  the 
court." 

Section  II,   Id.,  extends  the  doctrine  to  parties  defendant, 


saymg : 


"Apart  from  the  question  of  the  parties  being  numerous,  this 
rule  of  representation  has  been  applied  to  defendants  repre- 
senting as  trustees  all  parties  having  a  beneficial  interest  in  the 
subject-matter,"  etc. 

The  essence  of  the  rule  as  recognized  by  the  decisions  is  that 
where  the  party  holding  the  legal  estate  is  a  party  to  the  suit, 
those  having  merely  an  equitable  interest  need  not  be  made 
parties  defendant  unless  the  rights  of  those  holding  the  equitable 
interest  are  in  some  Avay  antagonistic  and  adverse  to  that  as- 
serted by  the  plaintiffs.  It  is  clear  that  in  the  instant  case  the 
Texline-Burk  Oil  Company,  as  such,  could  not,  if  it  were  a 
party,  assert  any  adverse  interest  to  that  of  the  plaintififs  herein. 
The  wrongs  complained  of  by  the  plaintiff  are  certainly  a  viola- 
tion of  the  rights  of  the  association,  as  well  as  of  all  its  mem- 
bers.    In  Carleton  v.  Roberts^^  the  court  says : 

"While  the  rule  that  all  parties  in  interest  ought  to  be  made 
parties  is  w^ell  established,  so  also  are  the  exceptions  to  it. 
*  *  *  Another  is  where  parties  form  a  voluntary  association 
for  public  or  private  purposes,  and  those  who  sue  or  defend 

69  1  Posey,  Unrep.  Cas.  587. 


156  Trusts  for  Business  Purpose;s. 

[BINGHAM   V.    GRAHAM.] 

may  fairly  be  presumed  to  represent  the  rights  and  interests  of 
the  whole.  In  these  cases  the  suit  may  well  be  brought  by  the 
plaintiff,  either  alone  or  with  others,  in  belialf  of  himself  and 
all  others  interested."^** 

83 — Appointment  of  Receiver  Discretionary  with  Court. 

Appellate  courts  will  not  ordinarily  interfere  in  the  appoint- 
ment of  receivers  unless  a  clear  abuse  of  discretion  is  shown.®^ 
In  any  event,  under  rule  62a  (149  S.  W.  x)  which  provides 
that  no  judgment  shall  be  reversed  on  appeal  on  the  ground 
that  the  trial  court  lias  committed  an  error  of  law — unless  the 
error  complained  of  amounted  to  such  a  denial  of  the  rights 
of  the  appellant  as  was  reasonably  calculated  to  cause,  and 
probably  did  cause,  the  rendition  of  an  improper  judgment  in 
the  case,  or  was  such  as  probably  prevented  the  appellant  from 
making  a  proper  presentation  of  the  case  to  the  appellate  court 
— the  appointment  without  the  association  being  a  party  is  not 
reversible  error.  Appellants  filed  no  motion  to  discharge  the 
receiver,  and  did  not  raise  the  question  of  nonjoinder  in  the 
trial  court.^^  We  have  discussed  this  question  upon  the  theory 
that  the  association  belongs  to  the  class  designated  as 
"trusts."62J 

It  is  not  clear  from  the  petition  what  authority  the 
stockholders  may  liave  over  the  board  of  trustees  in  directing 
the  affairs  of  the  association,  but  some  of  the  provisions  of  the 
articles  of  the  association  seem  to  indicate  that,  while  the  pro- 
moters intended  to  create  a  joint-stock  association,  yet,  under 

60  story's  Eq.  PI.  94,  97,  114  a,  Slaughter    v.    American    Baptist 

115.  Publication    Society,    150    S.   W. 

6123  R.  C.  L.  p.  10,  Sec.  4.  224. 

62  Schuster  et  al.  v.  Crawford  62s  Wrightington       Unincorpo- 

(Tex,  Civ.  App.),  199  S.  W.  327,  rated  Associations  Page  4. 


BENijFiciARms  OR  Shareholders.  157 

[BINGHAM   V.    GRAHAM.l 

the  rules  of  law  announced  in  the  decisions  in  section  14  in 
Unincorporated  Associations,  the  Texline-Burk  Oil  Company 
should  be  held  to  be  a  partnership  rather  than  a  joint-stock 
association.  Of  course,  if  it  is  a  partnership  under  the  rules 
announced  in  that  section,  the  association  could  not  be  sued  by 
name,  since  a  partnership,  regardless  of  the  name  in  which  its 
business  may  be  conducted,  is  not  a  legal  entity. 

84 — Beneficiaries  May  Have  Trustees  Removed  for  Cause. 

A  necessary  party  is  one  who  is  so  vitally  interested  in  the 
subject-matter  that  a  valid  decree  cannot  be  rendered  without 
his  presence  as  a  party. ^^  This  being  the  test,  it  is  clear,  we 
think,  that  the  association  is  not  a  necessary,  though  it  may 
be  a  proper,  party.  Appellants  have  waived  the  question  of 
non-joinder  of  proper  parties  by  failing  to  raise  it  in  the  lower 
court.  The  case  made  by  the  pleading  being  one  in  which  trus- 
tees are  sued  by  some  of  the  beneficiaries  in  behalf  of  others 
alleging  insolvency  of  the  trustees,  breach  of  trust,  misconduct, 
misapplication  of  trust  funds,  use  of  their  authority  as  trustees 
of  the  fund  for  their  own  personal  profit,  refusal  to  account 
for  and  pay  over  income,  fraud  in  executing  a  fictitious  note 
and  mortgage,  loss  of  trust  funds  through  employment  of  ir- 
responsible servants  selected  by  them  to  perform  the  very  duties 
imposed  upon  them  by  the  articles  for  personal  execution,  and 
danger  of  further  loss  by  reason  of  want  of  care  and  attention, 
the  rules  governing  in  cases  of  trust  and  the  appointment  of 
receivers  for  trust  estates  apply.  It  its  uniformly  held  that 
such  facts,  even  under  general  equity  practice,  are  grounds  for 
the  removal  of  such  trustees  and  the  appointment  of  receivers, 

63  Biggs   V.   Miller    (Tex.   Civ.   App.),  147  S.  W.  632. 


158  Trusts  for  Business  Purposes. 

rBINGHAM    V.    «JKAHAM,] 

at  least  until  new  trustees  are  selected.^* 

"Notwithstanding  the  aversion  already  indicated  which 
courts  of  equity  entertain  toward  the  appointment  of  receivers 
to  displace  trustees,  except  for  good  cause  shown,  it  has  been 
held  when  the  object  of  the  action  was  the  removal  of  a  trustee 
from  his  trust  on  the  ground  of  unfitness;  that  the  court  might 
properly  appoint  a  receiver  pendente  lite,  the  propriety  of  relief 
in  such  case  being  regarded  as  a  matter  resting  in  the  discretion 
of  the  court  to  which  the  application  was  addressed.  When 
land  is  devised  to  a  trustee  to  hold  and  manage  it  and  to  pay 
the  rents  and  income  to  certain  beneficiaries,  the  insolvency  of 
the  trustee  and  his  misapplication  of  the  proceeds  of  sales  of 
the  property  and  his  failure  to  apply  the  income  in  accordance 
with  the  terms  of  the  trust,  and  his  appropriation  of  such  in- 
come to  his  own  use,  constitute  sufficient  ground  for  an  injunc- 
tion and  a  receiver  in  an  action  by  the  beneficiaries  for  an 
accounting.  *  *  *  So  the  withholding  of  trust  funds  by 
defendant  is  sufficient  ground  for  a  receiver  upon  a  bill  by 
the  beneficiary  for  an  accounting  as  to  such  funds."^*^ 

85 — In  Emergency  Receiver  May  he  Appointed  Bx  Parte  With- 
out Notice. 

Appellant's  next  proposition  is  tliat  the  court  was  not  war- 
ranted in  appointing  the  receiver  ex  parte.  It  is  true  that  the 
general  rule  is  tliat  receivers  should  not  be  appointed  except 
upon  notice  and  hearing,  but  under  the  allegations  here  we 
think  the  rule  should  not  be  applied.  As  stated  above,  this  is 
not  a  suit  in  which  the  appointment  of  a  receiver  is  the  only 
relief  sought.     A  fair  consideration  of  the  petition  shows  that 

64  Perry  on  Trusts   (6th  Ed.),  64i  High     on     Receivers     (4th 

Sec.  275,  39  Cyc.  pp.  261,  264.  Ed.),  Sec.  697. 


Bene;ficiaries  or  Shareholders.  159 

[BINGHAM   V.    GRAHAM.] 

it  is  an  action  against  trustees,  brought  by  the  beneficiaries  for 
themselves  and  others  whose  names  they  were  not  able  to 
learn,  after  diligent  effort,  alleging  many  things  authorizing,  if 
true,  not  only  a  personal  judgment  against  the  trustees,  but 
showing  many  well  recognized  grounds  for  the  appointment  of 
a  receiver.    We  quote  from  23  R.  C.  L.  p.  38,  as  follows : 

"Courts  of  equity  are  adverse  to  interfering  ex  parte  and 
will  not  ordinarly  entertain  an  application  for  the  appointment 
of  a  receiver  except  upon  notice  to  the  adverse  party.  Such  a 
court  has  no  more  power  than  any  other  court  to  condemn  a 
man  unheard  and  to  dispossess  him  of  property  prima  facie  his 
and  hand  over  its  enjoyment  to  another  on  an  ex  parte  claim 
for  it.  It  should  therefore  exercise  extreme  caution  in  the  ap- 
pointment of  receivers  on  ex  parte  applications  and  be  careful 
that  a  proper  case  is  presented  before  it  acts,  and  it  should  not 
be  done  without  notice  to  the  party  whose  property  is  to  be 
afifected,  except  in  cases  of  the  greatest  emergency  demanding 
immediate  interference  of  the  court." 

The  text  states  the  rule  as  shown  by  the  cases  in  the  note 
where  it  is  sought  to  deprive  one  of  property  to  which  he  has 
a  clear  right  and  the  claim  of  the  applicant  is  doubtful,  but 
we  have  no  such  case  under  consideration  here.  As  stated,  the 
defendants  in  the  main  are  trustees  charged  with  certain  speci- 
fied duties,  while  the  applicants  are  the  beneficiaries,  rendered 
helpless,  unless  aided  by  the  court,  by  the  instrument  framed 
by  the  trustees  and  constituting  them  such.  We  quote  further 
(Id.  p.  39)  : 

"The  general  rule  that  notice  must  be  given  to  the  adverse 
party  of  an  application  for  the  appointment  of  a  receiver  is  not 
inflexible,  but  yields  to  an  imperative  necessity  for  an  ex  parte 
appointment  to  prevent  irreparable  loss.  Thus  it  has  been 
frequently  held  that  notice  might  be  dispensed  with  in  cases 


i6o  Trusts  for  Business  Purposes. 

[BINGHABI   V.    GRAHAM.] 

where  it  appeared  that  the  defendant  was  insolvent  and  was 
disposing  of  his  property  with  the  intention  of  placing  it  be- 
yond the  reach  of  his  creditors.  It  must,  however,  clearly  ap- 
pear that  the  danger  is  real,  and  that  the  delay  incident  to  the 
giving  of  notice  will  result  in  an  irreparable  injury,  and  the 
defendant  should  be  afforded  a  speedy  hearing  on  a  motion  to 
vacate  the  order." 

In  this  case  no  motion  was  made,  but  the  appellants  content 
themselves  with  bringing  the  case  to  this  court  and  attacking 
the  trial  judge's  action  solely  upon  the  sufficiency  of  plaintiff's 
allegations  to  sustain  it.    Quoting  further: 

"Moreover,  it  has  been  held  that  a  receiver  will  not  be  ap- 
pointed without  notice  when  a  court  has  the  powers  to  grant  a 
temporary  restraining  order  without  notice  and  the  same  is 
ample  to  protect  the  property  until  notice  is  given  and  the 
application  for  a  receiver  heard  and  determined."    Id.  p.  39. 

While  it  is  true  that  a  temporary  restraining  order  might 
meet  the  ends  of  justice  in  so  far  as  several  grounds  stated  in 
the  petition  are  concerned,  as  to  others,  even  a  mandatory  in- 
junction would  not  be  an  adequate  remedy.  These  principles, 
of  course,  have  been  applied  in  jurisdictions  where  the  remedy 
rests  purely  upon  equitable  rights,  in  this  state  the  right  to  a 
receiver  has  been  extended,  broadened,  and  defined  by  statu- 
tory enactment.  Article  2128,  V.  S.  C.  S.  subd.  i,  authorizes 
the  appointment  of  receivers  where  partners  or  others  jointly 
owning  or  interested  in  any  property  or  funds  show  that  the 
property  or  fund  is  in  danger  of  being  lost,  removed,  or  mate- 
rially injured.  The  facts  alleged  bring  this  case  within  that 
statute.  They  not  only  show  danger  of  loss,  but  actual  loss, 
and  the  effect  of  the  statute  is  to  entitle  them  to  a  receiver  with- 
out further  negativing  the  existence  of  an  adequate  remedy 
at  law.     Such  has  been  the  holding  of  the  courts  of  this  state 


Beineficiaries  or  Shareholders.  i6i 

[BINGHAM    V.    GKAH-^M.] 

with  reference  to  applications  for  injunction  as  well  as  for 
receivers. ^^  In  the  case  of  Temple  State  Bank  v.  Mansfield,^^ 
it  was  shown  by  the  petition  that  a  trust  fund  in  which  appellee 
was  interested  was  held  by  that  bank  with  notice  of  the  terms 
of  the  escrow  agreement  under  which  it  was  deposited ;  that  the 
bank  refused  to  furnish  any  information  as  to  the  condition  of 
the  account,  referring  the  plaintiff  for  such  information  to  one 
James  E.  Ferguson,  who  also  failed  and  refused  to  furnish  the 
desired  information.  There  was  no  allegation  of  insolvency, 
but  a  prayer  for  a  receiver.    Judge  Pleasants  said : 

"We  think  the  allegations  of  the  petition  were  sufficient  to 
authorize  the  court  to  appoint  a  receiver  of  the  fund.  Sub- 
division I  of  article  2128,  V.  S'  C.  S.,  expressly  authorizes  the 
appointment  of  a  receiver  in  an  action  between  partners  or 
others  jointly  owning  or  interested  in  any  property  or  fund, 
on  the  application  of  any  party  whose  right  to  or  interest  in  the 
property  or  fund  or  the  proceeds  thereof  is  probable,  anrl 
where  it  is  shown  that  the  property  or  fund  is  in  danger  of  be- 
ing lost,  removed  or  materially  injured.  We  think,  when  the 
trustee  of  a  special  fund  held  under  an  express  trust  not  only 
refuses  to  execute  the  trust,  but  refuses  to  give  any  informa- 
tion to  a  joint  owner  of  the  fund  as  to  its  condition,  or  as  to 
where  or  in  whose  name  it  is  held  or  deposited,  it  may  be  reason- 
ably inferred  that  the  fund  is  in  danger  of  being  'lost,  diverted, 
misapplied,  and  put  beyond  the  reach  of  plaintiff  and  of  this 
court.'  And  such  allegation  in  the  petition  in  this  case,  being 
a  reasonable  inference  from  the  facts  alleged,  is  not  a  mere 
conclusion  of  the  pleader. 

The  right  to  have  a  receiver  appointed  under  an}'  of   the 

65  Acme  Cement  Plaster  Co.  v.       (Tex.  Civ.  App.),  167  S.  W.  183. 
American     Cement     Plaster     Co.  66  215  S.  W.  154. 


i62  Trusts  for  Business  Purposes. 

[BINGHAM   V.    GRAHAM.] 

first  three  sections  of  the  article  above  cited  is  a  legal  right, 
not  dependent  upon  the  general  rules  of  practice  in  courts  of 
equity,  and,  when  the  facts  alleged  in  a  particular  case  as 
grounds  for  the  appointment  of  a  receiver  bring  the  case  within 
the  provisions  of  either  of  these  sections  of  the  article,  allega- 
tions and  proof  of  insolvency  of  the  defendant,  inadequacy  of 
legal  remedy,  or  other  equitable  grounds  for  the  appointment 
of  a  receiver  are  not  required  to  authorize  such  action  by  the 
court.^' 

We  are  further  of  opinion  that  the  facts  alleged  were  suffi- 
cient to  justify  the  trial  court  in  concluding  that  for  the  full 
protection  of  plaintiff's  rights  the  immediate  appointment  of  a 
receiver  was  necessary  and  authorizing  such  appointment  with- 
out notice  to  the  appellant. 

The  allegations  of  a  petition  to  which  no  answer  was  filed 
must  be  taken  as  true  on  hearing  a  motion  of  plaintiff  to  ap- 
point a  receiver.^*  We  think  the  court  was  not  only  authorized 
by  the  allegations  in  the  petition  to  appoint  the  receiver  ex 
parte,  but  might  have  appropriately  issued  a  temporary  re- 
straining order  preventing  the  bank  from  proceeding  to  collect 
its  fictitious  note  under  the  power  of  sale  in  the  mortgage.  The 
powers  given  the  receiver,  however,  are  probably  broad  enough 
to  meet  the  emergency.  The  prayer  of  the  petition  does  not 
specifically  ask  for  the  removal  of  the  trustees,  but  it  is  said  in 
High  on  Receivers  :^^ 

"When  real  estate  has  been  devised  to  trustees  upon  certain 
specific  trusts,  and  a  receiver  of  the  estate  is  appointed  upon 

67CotulIe     V.     Mortgage     Co.  994.     (See,  also,  23  R.  C.  L.  p.  31, 

(Tex.  Civ.  App.),  86  S.  W.  339;  Sec.  28.) 

Shaw  V.  Shaw,  51  Tex.  Civ.  App.  68  Simpson  v.  Alexander  (Tex. 

55,    112    S.    W.    127;    Sumner  v.  Civ.  App.),  188  S.  W.   285. 

Crawford,  91  Tex.  130,  41  S.  W.  69  4th  Ed.  Sec.  704. 


Beneficiaries  or  Shareholders.  163 

[BINGHAM   V.    GRAHAM.] 

the  ground  of  their  misconduct  and  incapacity,  it  is  proper, 
upon  the  appointment  of  new  trustees,  that  the  management  of 
the  estate  should  be  transferred  from  the  receiver  to  such  new 
trustees,  and  the  court  will  so  order  if  satisfied  that  it  may 
be  done  without  injury  to  the  legatees  under  the  will  and  when 
it  is  apparent  that  it  will  result  to  the  advantage  of  the  estate 
by  doing  away  with  the  expense  of  the  receivership.  The 
prayer  of  the  petition  being  for  general  and  equitable  relief, 
and  the  pleading  failing  to  show  the  right  of  the  beneficiaries 
to  elect  other  trustees  if  need  be,  to  succeed  the  receiver  in  the 
management  of  the  estate,  presents  merely  a  question  of  prac- 
tice resting  in  the  sound  discretion  of  the  trial  court,  and  is 
not  ground  for  objection  to  the  appointment  of  the  receiver  in 
the  first  instance.'"'^ 

It  would  needlessly  prolong  the  opinion  to  discuss  the  au- 
thorities cited  by  appellant  in  detail,  and  to  show  wherein  we 
think  they  do  not  apply  to  the  several  allegations  of  fact  con- 
tained in  the  petition.  A  summary  of  these  allegations  is  made 
above,  and  the  applicability  of  most  of  the  authorities  may  be 
disposed  of  by  the  general  statement  that  they  are  not  cases 
applying  to  receiverships  of  trust  estates.  The  petition,  we 
think,  shows  a  case  clearly  within  the  terms  of  the  statute,  and 
the  matter  of  the  appointment  was  within  the  sound  discretion 
of  the  trial  judge,  and  no  such  abuse  of  that  discretion  appears 
that  would  warrant  this  court  in  reversing  his  judgment.  If 
upon  a  trial  it  should  appear  that  the  facts  as  alleged  are  not 
true,  that  the  appellants  are  not  guilty  of  the  wrongs  charged, 
and  that  the  receiver  was  improvidently  appointed  under  the 
statute  and  rules  relating  to  receiverships,  appellants  have  an 
ample  remedy  for  any  wrong  inflicted. 

70  McCord     V.     Nabours,     101      W.  144. 
Tex.  494,   109   S.  W.  913,  111   S. 


164  Trusts  for  Business  Purposes. 

Believing  that  the  conclusion  reached  in  the  original  opinion 
is  correct,  the  judgment  is  affirmed. 

86 — Right  to  an  Accounting. 

Any  shareholders  of  an  express  contractual  trust  can  call  the 
trustee  to  account.'^  The  beneficiaries  under  a  trust  have  the 
right  to  be  kept  informed  at  all  times  concerning  the  manage- 
ment of  the  trust ;  and  it  is  the  duty  of  the  trustees  so  to  in- 
form them.  It  is  not  generally  presumed  that  the  beneficiaries 
have  such  information  from  independent  sources.  When  a  bill 
is  filed  to  call  trustees  to  an  accounting,  any  testimony  throw- 
ing light  on  their  management  bears  directly  on  the  perform- 
ance of  this  duty  and  may  be  considered  in  taking  the  accounts 
and  in  determining  the  view  to  be  taken  of  the  conduct  of  the 
trustees.'''^  The  trustees  must  render  to  their  beneficiaries  a 
full  account  of  their  dealings  with  the  trust  fund,'^  and  their 
accounts  should  be  open  at  all  times  on  demand  to  the  inspec- 
tion of  the  shareholder.'''*  Where  a  trustee  by  fraud  or  con- 
cealment makes  a  profit  out  of  the  sale  of  the  trust  property, 
the  profit  belongs  exclusively  to  the  shareholders  and  the  trus- 
tee can  be  made  to  account  for  it  although  it  is  necessary  to 
show  that  the  profit  was  made  at  the  beneficiaries'  expense,  that 
it  was  part  of  their  property  and  would  have  been  gained  by 
them  had  the  trustee  performed  his  duties.'''^ 

71  Hart  V.  Equitable  Life  73  Bone  v.  Hayes,  154  Cal.  759, 
Assur.    Society,    172    App.    Div.       99  Pac.  172. 

659,  158  N.  Y.  Sup.  1063.  74  Wylie   v.   Bushnell,   277    111. 

72  Loud      V.      Winchester,      52      484,  115  N.  B.  618. 

Mich.  174,  17  N.  W.  784.  75  Heckscher    v.    Blanton,    111 

Va.  648,  69  S.  E.  1045. 


Beineficiaries  or  Share;holders.  165 

87 — Right  to  Protect  Trust  Property  or  Funds. 

While  it  is  the  duty  of  a  trustee  to  protect  the  trust  property, 
the  general  rule  is  that  the  shareholder,  as  the  real  party  in 
interest,  may  maintain  a  bill  in  equity  for  the  benefit  of  the 
trust  estate  to  protect  his  own  interests ;  in  case  the  trustee 
neglects  or  refuses  to  act,  or  cannot  sue  on  account  of  his  own 
fraud  or  neglect  of  duty,  or  has  acquired  an  adverse  interest, 
the  beneficiary  may  maintain  a  bill  in  equity  for  relief^^ 
Every  shareholder  is  entitled  to  the  aid  of  a  court  of  equity  to 
avail  himself  of  the  benefit  of  the  trust  and  the  forbearance 
of  the  trustee  may  not  prejudice  him.''^'''  Upon  refusal  or 
neglect  of  a  trustee  to  bring  suit,  a  shareholder  may  sue  to 
protect  the  trust  estate ;  it  must  generally  be  alleged  and  proven 
that  a  demand  was  made  on  the  trustee  to  sue  and  he  refused 
to  do  so.'^ 

88 — Rights  Against  Trustees  and  Others. 

If  a  shareholder  be  injured  by  his  trustee  failing  to  bring 
suit  within  the  period  of  limitation  on  notes  belonging  to  the 
trust  estate,  his  remedy  is  against  the  trustee.'''^  If  a  trustee 
has  misappropriated  the  trust  estate,  the  shareholder  or  a  sub- 
stituted trustee  is  not  confined  to  the  legal  remedy  of  an  action 
for  damages  against  those  who  have  illegally  taken  the  trust 
estate,  but  may  maintain  an  action  in  equity  for  a  judgment  re- 
quiring the  property  taken  be  returned  to  the  possession  of  the 
trustee,  at  the  same  time  compelling  the  wrongdoers  to  account 

76  Canada   v.    Daniel,    175    Mo.  serve  Bond  Co.,  151  Fed.  305. 
App.  55,   157   S.  W.  1032;    Presi-  78  Canada  v.  Daniel,  Supra, 
dent    &    Trustees    Bowdoin    Col.  79  Smith    v.    Smith,    19    S.    W. 
V.  Merritt,  54  Fed.  55.  595. 

77  Morrill     v.     American     Re- 


i66  Trusts  for  Business  Purposes. 

for  the  interest  and  profits  which  they  have  received.^*'  If  a 
trustee  conspires  with  a  third  party  or  exceeds  his  authority  so 
as  to  benefit  such  third  party  to  the  beneficiary's  injury,  the 
latter  may  recover  against  such  third  party  ;^^  for  equity  will 
interfere  at  the  suit  of  beneficiaries  to  prevent  a  trustee  from 
doing  anything  tending  to  defeat  the  purposes  of  the  trust. ^^ 

89 — Right  to  Reimbursement. 

A  trust  estate  must,  as  a  rule,  bear  the  expense  of  its  admin- 
istration. Should  one  of  a  number  of  shareholders  having  a 
comm.on  interest  in  a  trust  fund  take  proper  proceedings  at  his 
own  expense  to  secure  it  from  destruction,  he  is  entitled  to  re- 
imbursement for  his  expense,  legal  advice  and  costs,  either  from 
the  fund  itself  or  by  proportional  contributions  from  those  who 
accept  or  receive  the  benefits  of  his  efforts. ^^ 

90 — Right  to  Transfer  and  Assign  Interests. 

A  shareholder  has  power  to  assign  his  equitable  interest  in 
the  trust  fund  to  another.^*  He  is  entitled  to  a  conveyance  and 
may  direct  that  it  be  made  to  another  so  as  to  pass  his  whole 
interest  in  the  property  ;^^  just  the  same  as  a  shareholder  may 
purchase  the  interest  of  another,^^  and  have  a  transfer  of  in- 
terests made  on  the  books  of  the  company.  Where  beneficiaries 
are  induced  by  alleged  fraudulent  representation  to  assign  their 

80  English  V.  Mclntyre,  29  Gas  Co.  (Delaware),  89  Atl.  593. 
App.  Div.  439,  51  N.  Y.  Sup.  697.  84Riordan     v.     Schlicher,    146 

81  Hall  V.  Houston  &  T.  C.  R.      Ala.  615,  41  South.  842. 

Co.,    52   Tex.    Civ.   App.   90,   114  85  Boothe    v.    Cheek,    253    Mo. 

S.  W.  891.  119,  161  S.  W.  791. 

82McFerren  v.   Fidelity  Trust  86  Murry     v.     King,     153     Mo 

Co.,  140  Ky.  536,  131  S.  W.  393.  App.   710,  135   S.  W.   107. 

83  Ross     v.     South     Delaware 


Beneficiaries  or  Shareholders.  167 

respective  interests  in  the  trust,  the  trustees  cannot  maintain  a 
suit  in  equity  for  and  on  behalf  of  the  beneficiaries  to  cancel 
the  assignments  or  compel  the  assignee  to  account  to  the  bene- 
ficiaries for  the  true  amount  due.^''' 

91 — May  Act  as  Trustees. 

Shareholders,  as  such,  are  not  incapacitated  from  being  trus- 
tee for  themselves  and  others  ;^^  they  may  be  appointed  as  trus- 
tees without  afifecting  the  validity  of  the  trust. ^^  The  right  of 
shareholders  to  act  as  trustees,  or  to  appoint  or  elect  new  trus- 
tees should  be  fully  and  clearly  set  forth  in  the  declaration  of 
trust.*''  The  fact  that  one  is  both  trustee  and  beneficiary  does 
not  prevent  him  from  acquiring  the  interest  of  another  bene- 
ficiary.®^ 

92 — Liability  of. 

Ordinarily  there  is  no  liability  attached  to  the  shareholder. 
He  does  no  contracting  and  has  nothing  to  do  with  the  business 
management  of  the  trust;  he  has  a  right  to  inquire  into  the 
methods  and  good  faith  of  the  trustees  and  in  proper  cases,  the 
right  to  file  suit.  If  his  suit  should  be  groundless,  the  trustee 
may  be  entitled  to  retain  from  the  beneficiary's  share  a  pro- 
portionate amount  for  payment  of  attorney's  fees.®^  An  at- 
torney's fee  can  not  be  charged  in  the  bill  of  costs  against  the 

87  Lovato  V.  Catron,  26  N.  M.  89  Nellis  v.  Rickard,  133  Cal. 
168,  148   Pac.   490.  617,   66   Pac.  32. 

88  In  re  Fox's  Estate,  264  Pa.  90  Grundy  v.  Drye,  104  Ky. 
478,     107     Atl.     863;      Story     v.  825,  48  S.  W.  155. 

Palmer,  46   N.  J.   Eq.   1,  18   Atl.  91  Miirry  v.  King,  Supra. 

363.  92  Thome    v.    Allen    (Ky.),    70 

S.  W.  410. 


i68  Trusts  for  Business  Purposes. 

defeated  plaintiff  who  as  beneficiar>'  brought  a  groundless  suit 
for  an  accounting  against  his  trustee;  but  the  solicitor's  fees 
and  the  expenses  of  the  trustee  in  defense  thereof  are  to  be 
paid  out  of  the  complainant's  share  in  the  trust  estate  and  not 
charged  against  the  estate  generally  or  against  a  general  fund 
which  the  co-beneficiaries  would  have  to  contribute.^^ 

93 — Not  Liable  as  Partners. 

The  shareholders  are  not  made  co-partners,  nor  liable  as 
such  for  the  expenses  incurred  by  the  trustees.** 

94 — Ratification. 

The  general  rule  is  that  a  trustee  can  not  take  part  in  a 
transaction  in  \\'hich  he  has  an  interest  adverse  to  the  share- 
holders, but  where  this  situation  occurs,  the  latter,  by  retaining 
the  consideration  and  not  electing  to  terminate  the  contract, 
ratify  it.**  A  trustee  can  not  deal  to  his  personal  advantage 
with  the  trust  estate,  yet  a  shareholder  can  not  allege  an  act 
on  the  part  of  his  trustee  to  be  a  breach  of  trust  which  has  been 
done  under  his  sanction,  procurement,  or  concurrence.*^ 
Where  a  shareholder — with  full  knowledge  of  all  the  facts — 
"assents  to  a  purchase  by  the  trustee,  and  the  price  paid  is  ade- 
quate, he  can  not  set  aside  the  sale,  though  the  trustee  may 
make  large  profits  by  his  purchase.*'  A  shareholder  whose 
trustee  has  made  investment  from  trust  funds  in  improper  se- 
curities may  retain  the  securities  and  thereby  ratify  the  wrong; 

93  Patterson  v.  Northern  Trust      from  other  Organizations. 

Co.,    207    111.    App.    361,    286    111.  95  Phillips    v.    Sanger    Lumber 

564,  122  N.  E.  55.  Co.,  130  Cal.  431,  62  Pac.  749. 

94  Mayo  V.  Moritz,  24  N.  E.  96  Ungrich  v.  Ungrich,  131 
1083.  See  Partnership  under  App.  Div.  24,  115  N.  Y.  Sup.  413. 
paragraph  Trusts   Distinguished          97  Ungrich  v.  Ungrich,  Supra. 


Be;ne;i='iciarie;s  or  Shareholders.  169 

or  reject  them  and  claim  damages  for  wrongful  investment;  or 
claim  damages  and  charge  the  securities  that  belong  to  the 
wrongdoer  with  a  lien  for  the  damages  suffered. ^^  For  a  share- 
holder to  be  estopped  by  ratification  and  acquiescence  from 
complaining  of  an  unauthorized  investment  by  the  trustee,  he 
must  have  known  of  all  the  facts  and  been  apprised  of  his 
legal  rights,^^  and  in  addition  he  must  know  how  the  facts 
would  affect  his  rights  in  equity. ^^^ 

98  In    Re    Mendel's    Will,    164       589,  48  N.  E.  128. 

Wis.  136,  159  N.  W.  806.  100  Internatl.     Trust      Co.     v. 

99  White   V.   Sherman,   163   111. 


CHAPTER  VIII. 
TRUSTEES  IN  GENERAL. 

95 — Appointment  of. 

The  creator  of  a  trust  has  the  power  not  only  to  designate 
the  original  trustees  in  the  trust  agreement,  but  also  to  provide 
for  the  appointment  of  successive  trustees.  Where  an  ap- 
pointment is  made  under  such  power,  the  new  trustee  becomes 
vested  with  the  title  to  the  trust  property  and  is  clothed  with 
the  same  powers  as  if  he  had  been  named  originally ;  no  con- 
veyance need  be  made  to  him  by  the  former  trustee  or  his  rep- 
resentatives— if  he  be  dead.^  A  trust,  valid  at  its  inception  is 
never  permitted  to  fail  for  lack  of  a  trustee ;  e.  g.,  a  conveyance 
in  trust  to  two,  one  capable  of  taking  and  one  not,  will  not  be- 
come invalid  by  reason  of  the  death  of  the  competent  trustee.* 
A  trustee,  having  accepted  appointment  as  such  and  having  re- 
ceived the  trust  fund,  will  be  estopped  from  questioning  the 
creation  of  the  trust,  and  from  denying  the  right  of  the  bene- 
ficiary to  the  trust  fund.'  Upon  the  refusal  of  a  trustee  to  act, 
equity  will  either  compel  him  to  act,  or  will  appoint  another 
trustee  in  his  place.*  A  trust  can  not  fail  for  want  of  a  trustee, 
or  by  the  refusal  of  all  the  trustees  to  accept  the  trust  ;^  equity 

Preston   (Wyo.),  156  Pac.  1128.  3  Boehmer    v.     Silvestone,     95 

1  Yates   V.    Yates,    255    111.    66,      Ore.  154,  186  Pac.  26. 

99  N.  E.  360;  Stein  v.  Safe  Dep.  4  Anderson  v.  Phegley,  57  Ore. 

&  Trust  Co.,  127  Md.  206,  96  Atl.  172,  110  Pac.  975. 

349.  5  Adams  v.  Adams,  86-80  U.  S. 

2  Farmers'   Loan   &   Trust   Co.  Sup.  Ct.  504. 
V.  C.  &  A.  Ry.  Co.,  27  Fed.  146. 

(170) 


Trustee;s  in  GeineraIv.  171 

will  not  permit  a  trust  to  fail  for  want  of  a  trustee,*^  but  will 
appoint  one  to  execute  the  trustJ 

96 — Hold  Legal  Title. 

Under  the  common  law,  the  legal  estate  in  the  hands  of  a 
trustee  possesses  precisely  the  same  properties,  characteristics 
and  incidents  as  if  the  trustee  were  the  absolute  owner. ^  Even 
though  exclusive  legal  title  to  trust  property  is  vested  in  the 
trustee,^  he  is  merely  the  depositary  of  the  legal  title  and  his 
estate  is  but  a  power  that  may  be  exercised,^''  for  the  equitable 
title  or  ownership  is  in  the  beneficiaries.  The  rule  is,  the  abso- 
lute ownership  of  property  is  suspended  by  the  creation  of  a 
trust  which  vests  the  estate  in  the  trustee^^  who  comes  into  ex- 
istence with  the  declaration  of  trust;  he  is  the  delegate  of  the 
trustor  or  creator,  and  needs  no  sanction  from  any  further 
authority  but  derives  his  title  from  the  instrument  per  se.^'* 
A  trustee  takes  such  estate  as  the  purposes  of  the  trust  require 
and  if  a  fee  is  necessary  he  takes  it.^^  A  trust  contemplates 
the  holding  of  property  by  one  for  the  benefit  of  another,  hence 
the  same  person  may  not  at  the  same  time  be  both  sole  trustee 
and  sole  beneficiary  of  the  same  interest.^* 

At  common  law  the  appointment  of  new  trustees  in  succes- 
sion, not  in  execution  of  a  special  power,  does  not  vest  title  in 

6  Hill  V.  Hill  (Okla.),  152  Pac.  Lum.  Co.  (Tex.  Civ.  App.),  123 
1122.  S.  W.  1162. 

7  Brock  V.  Conkwright,  179  Ky.  11  Dorman  v.  Balestier,  175 
555,  200  S.  W.  962.  N.  Y.   Sup.   677. 

8  Randolph  v.  Hinck,  288  111.  12  In  re  Hoyt,  103  Misc.  Rep. 
99,  123  N.  E.   273.  614,  170  N.  Y.  Sup.  846. 

9  Welsh  V.  City  of  Boston,  221  13  Nixon  v.  Nixon,  268  111.  524, 
Mass.  155,  109  N.  E.  174.  109   N.  E.   294. 

10  Arnold     v.     Southern     Pine  14  Weeks  v.  Frankel,  197  N.  Y. 

304,  90  N.  E.  969. 


172  Trusts  for  Business  Purposes. 

the  new  trustees  without  conveyance. ^^  This  rule  has  been 
changed  by  statute  in  a  majority  of  the  states  and,  of  course, 
does  not  apply  where  the  instrument  provides  that  the  title  to 
property  held  by  the  trustees  shall  vest  in  their  successors. 
The  rule  is  also  well  established  that  where  one  of  two  or  more 
trustees  disclaims,  the  remaining  trustee  or  trustees  are  vested 
with  all  the  powers  of  the  trust  necessary  to  carry  out  the 
purpose.^^ 

97 — Act  as  a  Unit. 

In  the  absence  of  special  agreement  or  special  powers  granted 
to  the  trustees,  they  act  as  a  unit,  for  trustees  of  a  trust  estate 
hold  as  joint  tenants  unless  there  is  a  provision  to  the  contrar}'. 
On  the  death  of  one  trustee,  administration  of  the  trust  de- 
volves on  the  survivors  and  does  not  pass  to  the  heirs. ^''^  The 
rule  that  a  trust  or  power  delegated  to  two  or  more  jointly 
must  be  jointly  executed  applies  as  well  to  trusts  coupled  v/ith 
an  interest  as  to  cases  of  mere  naked  powers.^^  Where  the 
granting  of  a  lease  of  trust  property  is  an  important  and  mate- 
rial act  in  the  way  of  carrying  out  the  trust,  requiring  an  exer- 
cise of  the  judgment  and  discretion  of  both  the  trustees,  it  is 
necessary  for  both  of  them  to  execute  the  lease  in  order  to 
make  a  valid  instrument. ^^  One  of  several  trustees  in  whom 
confidence  has  been  reposed  jointly,  with  no  power  given  to 
him  to  act  singly — either  expressly  or  by  implication — can  not 

16  Glazier  v.  Everett,  224  Mass.  17  Reichert  v.  Mo.   &  111.   Coal 

184,   112   N.   E.   1009.  Co.,  231  111.  238,  83  N.  E.  166. 

16  Stein  V.   Safe  Dep.  &  Trust  18  Dingman   v.    Boyle,   285    111. 

Co.,  127  Md.  206,  96  Atl.  349;   In  144,  120  N.  E.  487. 

re  Kellogg,    214    N.    Y.    460,    108  19  Hoosier    Mining   Co.   v.    Un- 

N.    E.   844.  ion  Trust  Co.,   173  Ky.  505,   191 

S.  W.  305. 


Trustee;s  in  General.  173 

sell  the  trust  property  without  the  consent  of  the  others. ^•'  In 
law,  there  is  not  such  a  person  as  an  acting  trustee  apart  from 
his  cotrustees,  all  who  accept  the  office  being  acting  trustees.^^ 

98 — Act  by  Majority. 

Where  there  are  several  trustees,  the  instrument  creating  the 
trust  may  grant  the  trustees  the  power  of  acting  by  majority, 
and  in  the  absence  of  such  power,  all  must  join  in  the  deed.^^ 
While  this  seems  to  be  the  general  rule,  still  in  cases  of  urgent 
emergency,  a  majority  might  convey  or  bind  the  trust  prop- 
erty ;^^  and  where  there  are  three  trustees,  two  of  them  as  such 
might  sell  and  assign  trust  property  with  the  consent  or  con- 
currence of  the  third.2*  In  spite  of  the  rule  tliat  trustees  can 
not  delegate  their  power,  they  may  be  bound  where  they  consent 
and  concur  in  the  actions  of  a  single  trustee,  when  he  acts  as 
agent  for  the  others. ^^  Hence  the  action  of  a  single  one  of  joint 
trustees  may  be  ratified,  if  done  in  the  legal  way,  by  his  co- 
trustees; "ratification"  of  a  contract  implying  the  giving  of 
consent  to,  or  the  sanctioning  of,  its  terms.^^  In  the  same  man- 
ner, a  contract,  signed  by  the  associate  name  of  trustees  and 
sealed  without  formal  authority,  becomes  binding  on  the  trust 
if  a  majority  of  the  trustees  expressly  or  impliedly  by  parol 
afterward  adopt  it.'^' 

20  Dodge  V.  Lacey    (Tex.),  216  App.    Div.    532,    76    N.    Y.    Sup. 
S.   W.    400.  625. 

21  Dingman  v.  Boyle,  Supra.  25  Bunn     v.     City     of     Laredo 

22  Page  V.  Gillett,  26  Colo.  App.  (Tex.),  213  S.  W.  320. 

204,  141  Pac.  866.  26  Hoosier    Mining   Co.    v.    Un- 

23  Page  V.  Gillett,  Supra.  ion   Trust   Co.,    Supra. 

24  Fritz   V.   City  Trust   Co.,   72  27  Rand  v.  Farquhar,  226  Mass. 

91,   115   N.   E.   286. 


174  Trusts  for  Business  Purposes. 

99 — Cotrustees. 

A  trustee  in  general  is  responsible  only  for  his  own  acts  or 
defaults,  and,  except  for  his  own  fraud  or  negligence,  is  not 
liable  for  the  trust  property  which  has  been  in  the  exclusive 
possession  and  under  the  sole  control  of  a  cotrustee.^^  But  if 
a  trustee  informs  the  beneficiaries  of  suspicious  acts  of  his  co- 
trustee, he  is  not  relieved  from  liability  arising  from  repetition 
of  such  conduct  when  he  takes  no  steps  to  protect  the  trust 
funds  in  the  future.^^  In  so  far  as  a  cotrustee,  though  less 
active  in  management  than  his  associate,  participates  in  illegal 
acts  resulting  in  loss  to  the  trust,  he  and  his  estate  must  respond 
in  damages.30  f^g  general  rule  is  that  where  property  is 
vested  in  three  trustees,  with  power  to  bring  suits,  etc.,  one  of 
them  has  no  authority  to  institute  a  suit  without  the  knowledge 
and  consent  of  his  cotrustees  ;3i  but  where  a  trustee  has  com- 
mitted a  breach  of  trust,  his  cotrustee  may,  with  or  without  the 
beneficiary  or  shareholder,  sue  to  restore  the  property .^^ 

100 — Substituted  Trustees. 

Where  a  trust  deed  gives  the  power  to  appoint  a  substituted 
trustee  in  case  the  original  trustee  refuses  or  fails  to  act,  the 
appointment  confers  no  title  on  the  substituted  trustee  if  made 
before  the  original  trustee  resigns  or  is  removed.^^  But  when 
the  substituted  trustee  qualifies  in  place  of  the  prior  trustee, 

28Anier.  Bonding  Co.  v.  Rich-  40  Atl.  883;   Appeal  of  Fesmire, 

ardson,  214  Fed.  897.  134  Pa.  67,  19  Atl.  502. 

29  In  re  Adams'  Estate,  221  Pa.  31  McGeorge    v.    Bigstone    Gap 

77,  70  Atl.  436.  Imp.  Co.,  88  Fed.  599. 

80  Meldon    v.    Devlin,    31    App.  82  Clemens    v.    Heckscher,    185 

Div.    146,    53    N.    Y.    Sup.    172;  Pa.  476,  40  Atl.  80. 

Barroll  v.  Foreman,  88  Md.  188,  33  Chesnutt   v.    Gann,    76    Tex. 

150,  13  S.  W.  274. 


.Trustees  in  General.  i75 

the  trust  in  his  hands  is  coextensive  with  and  is  as  effective  as 
if  he  had  been  named  in  the  instrument  originally .^^  Though 
a  successor  in  a  trust  is  not  liable  for  the  defaults  or  miscon- 
duct of  his  predecessor,  yet  he  must  obtain  all  the  property  of 
the  trust,  and  for  this  purpose  should  investigate  the  acts  of 
his  predecessor  and  recover  from  him  whatever  belongs  to  the 
trust  estate.^' 

loi — Attorneys  as  Trustees. 

Ordinarily,  in  the  absence  of  statutory  restrictions,  any  per- 
son may  be  appointed  a  trustee  who  is  capable  of  confidence  of 
holding  real  and  personal  property  and  of  executing  the  trust. 
Though  it  is  the  custom  of  courts  and  the  better  practice  to 
select  a  resident  of  the  state  as  a  trustee,  yet  they  are  not  with- 
out power  to  appoint  a  non-resident ;  and  there  is  no  inherent 
incapacity  in  a  married  woman  becoming  a  trustee  and  exer- 
cising the  legal  judgment  and  discretion  belonging  to  that  char- 
acter.36  Attorneys  at  law  may  be  trustees  either  in  trusts  pre- 
pared by  other  parties,  or  in  instruments  prepared  by  them- 
selves, and  as  such  trustees,  they  are  entitled  to  the  same 
cotnpensation  as  oilier  trustees.^'  Where  a  trustee  is  also  an 
attorney  and  renders  legal  services  in  connection  with  the  trust 
estate,  he  will,  in  a  proper  case,  be  entitled  to  be  paid  for  bis 
professional  services  out  of  the  common  fund,  as  though  the 
two  capacities  were  separate.^^ 

84Hayden   v.   Hayden,   178    N.  36  26  Ruling  Case  Law,  1272. 

C.  259,  100  S.  W.  515.  37  Locke  v.  Cope,  45  Okla,  69, 

35  In  re  Lane's  Will  (Del.),  97  146  Pac.  416;   Willis  v.  Clymer, 

Atl.  587;  In  re  Froelich's  Estate,  66  N.   J.  Eq.   284,  57  Atl.   803. 
50  Misc.  Rep.  103,  100  N.  Y.  Sup.  38  Taylor    v.    Denny,    118    Md. 

436.  124,  84  Atl.   369. 


CHAPTER  IX. 
POWERS  OF  TRUSTEES. 


1 02 — Express. 


The  express  powers  are  those  which  are  set  forth  in  the 
instrument  authorizing  the  trustees  to  perform  certain  acts  and 
duties;  no  particular  form  of  words  is  necessary  to  create  a 
power  in  the  trustees,  but  it  is  essential  that  the  intent  to  create 
the  power  appear,^®  for  a  trustee  of  an  express  trust  derives 
his  power  from  the  instrument  creating  it  and  such  instrument 
furnishes  the  measure  of  his  obligation.*"  The  power  to  act 
as  a  trustee  does  not  come  from  the  court,  but  is  found  in  the 
instrument  creating  the  trust.*^  Where  trustees  are  invested 
with  the  legal  estate,  a  power  conferred  on  them  is  a  power 
coupled  with  an  interest  which  survives  on  the  death  of  one  of 
them,  and  may  be  executed  by  the  survivor.*^  Where  trustees 
are  empowered  by  the  instrument  creating  the  trust  to  sell  the 
estate,  or  do  any  specific  acts,  they  may  be  compelled  to  per- 
form specifically  in  accordance  with  the  instrument.*^ 

103 — Implied. 

Where  a  trustee  conforms  with  the  provisions  of  a  trust  in 
their  true  spirit  and  meaning,  he  may  adopt  measures  and  do 

39  Crawford   v.   El   Paso   Land  41  Reeder  v.  Reeder,  184  la.  1, 
Imp.   Co.    (Tex.    Civ.   App.),   201       168  N.  W.  122. 

S.   W.   233.  42  Loring  v.  Marsh,  70-73  U.  S. 

40  Ainsa    v.    Mercantile    Trust      802. 

Co.,  174  Cal.  504,  163  Pac.  898.  43  Crawford    v.    El   Paso   Land 

Imp.  Co.,  Supra. 

(176) 


Powers  of  Trustees.  177 

acts  which,  though  not  specified  in  the  trust  instrument,  are 
imphed  in  its  general  directions  and  are  reasonable  and  proper 
means  for  making  them  effectual.**  \Miere  a  trust  deed  ex- 
pressly or  impliedly  authorizes  the  trustee  to  sell  realt}'  be- 
longing to  the  trust  estate,  no  action  of  the  court  is  necessary 
to  effect  a  proper  execution  of  the  power  thus  conferred.*^  If 
a  trustee  is  authorized  to  take  up  a  mortgage  and  hold  the 
property  for  favorable  disposal,  he  has  implied  power  to  re- 
mortgage  the  property  awaiting  advantageous  sale.*^  It  being 
the  duty  of  a  trustee  to  protect  the  trust  estate  from  waste,  in- 
vasion, or  trespass,  and  to  defend  suits  against  himself  with 
respect  to  the  trust  subject,  he  has  implied  power  to  employ 
counsel  therefor  at  the  expense  of  the  trust  fund.*''^  When  a 
trustee  who  has  possession  of  lands  belonging  to  the  trust 
estate  is  charged  with  the  payment  of  debts,  but  has  no  power 
of  sale,  he  has  implied  authority  to  lease  upon  such  terms  and 
conditions  as  usually  prevail  in  the  city  or  county  in  which 
the  land  is  situated.*^  If  a  trustee  is  cliarged  with  a  duty  which 
cannot  be  performed  without  a  power  of  sale,  and  no  power  of 
sale  is  expressly  given,  a  power  of  sale  will  be  implied.*^  The 
words  "invest  and  manage"  ordinarily  would  not  impart  or 
imply  a  power  of  sale,  but  it  has  been  held  that  where  a  con- 
trary intention  cannot  be  found  in  the  instrument  taken  as  a 
whole,  a  sale  might  be  made.^® 

44Kipp  V.   O'Melweney,  2  Cal.      72   S.  E.  701. 
App.  142,  83  Pac.  264.  48  Crown  v.  Cohn,  88  Ore.  642, 

45  Crown  V.  Cohn,  88  Ore.  642,      172   Pac.  804. 

172  Pac.  804.  49  Robinson    v.    Robinson,    105 

46  Gilbert  v.  Penfield,  124  Cal.      Me.  68,  72  Atl.  883. 

234,  56  Pac.  1107.  50  Robinson    v.    Robinson,    Su- 

47  Stull  V.  Harvey,  112  Va.  816,      pra. 


178  Trusts  for  Business  Purposes. 

104 — Discretionary. 

An  instrument  may  prescribe  all  the  steps  to  be  taken  by  the 
trustee  in  all  matters  of  detail  likely  to  arise  in  the  administra- 
tion of  the  trust,  but  leave  such  incidental  matters  to  the  dis- 
cretion of  the  trustees;  however,  this  does  not  defeat  the 
trust.^^  This  discretionary  power  annexed  to  the  office  of  trus- 
tee and  intended  to  form  an  integral  part  of  it,  will  survive  to 
a  trustee  succeeding  the  original  trustee;  but  it  is  otherwise 
where  the  powers  are  arbitrary  and  independent  of  the  trust 
and  not  an  integral  part  of  it,  for  the  discretion  then  would  be 
personal.^2  Discretionary'  power  jointly  confided  to  three  trus- 
tees by  name  to  give  all  or  any  part  of  the  fund  to  a  certain 
person,  can  not,  after  the  death  of  one  of  them,  be  carried  out 
by  the  survivors.^'  A  trustee  may  be  empowered  to  hold  or 
convey  property  according  to  his  judgment;  to  collect  the  prin- 
cipal of  securities  and  reinvest;  but  he  may  exercise  his  discre- 
tion only  in  doing  authorized  things ;  he  cannot  hold  securities 
transferred  to  him  which  he  is  not  authorized  to  hold.^* 

Trustees  having  general  power  to  invest  personalty  and  pay 
the  income  to  shareholders,  without  direction  as  to  the  character 
of  the  securities  in  which  the  investment  shall  be  made,  may, 
after  making  an  investment,  sell  the  securities  and  reinvest  in 
others,  if  prudent  to  do  so.^^  If  trustees  are  given  discretion- 
ary power  of  investment  and  reinvestment,  such  power  does 
not  make  it  necessary  that  they  be  invested  with  the  fee.^^  A 
trust  agreement  may  provide  that  a  sale  cannot  be  made  at 

51  Hoyt  V.  Bliss,  93  Conn.  344,  54  Babbit  v.  Fidelity  Trust  Co., 

105   Atl.   699.  72  N.  J.  Eq.  745,  66  Atl.  1076. 

62  Wilmington     Trust     Co.     v.  55  Citizens'  Natl.  Bank  v.  Jef- 
Jacobs,  9  Del.  Ch.  77,  77  Atl.  78.  ferson,  88  Ky.  651,  11  S.  W.  767. 

63  Dillard    v.    Dillard,    97    Va.  56  in  re  Spreckels'  Estate,  162 
434,  34  S.  E.  60.  Cal.  559,  123  Pac.  371. 


PowDRs  OF  Trustees.  179 

other  than  a  specified  price  except  on  consent;  if  consent  can- 
not be  procured,  the  trustee  may  use  his  discretion  to  com- 
promise claims  according  to  his  best  judgment,  using  due  care 
and  good  faith."  A  trustee  may  follow  the  tactics  of  a  pru- 
dent business  man  to  secure  a  fair  return  of  income  and  at  the 
same  time  maintain  the  corpus  of  the  principal  intact.^^  Where 
a  testamentary  trust  provides  that  the  trustees  may  sell  the 
property  and  reinvest  as  often  and  in  the  manner  they  see  fit, 
it  clothes  the  trustee  with  discretionary  power  to  dispose  of 
any  part  of  the  trust  fund  to  pay  the  inheritance  tax.^^  Where 
a  discretionary  power  is  vested  in  trustees  to  alienate  real  estate 
belonging  to  the  trust,  a  purchaser  is  not  bound  to  make  in- 
quiry as  to  whether  the  trustees  have  properly  exercised  their 
powers.^® 

A  trustee  of  realty  may  have  full  power  to  sell  the  same,  but 
his  discretion  as  to  the  investment  of  the  proceeds  of  the  sale 
will  not  be  interfered  with  if  the  rights  of  the  beneficiaries 
have  not  been  jeopardized;  and  the  purchaser  is  not  required 
to  see  that  the  proceeds  are  invested  according  to  the  trust.^^ 
A  trustor  may  endow  trustees  with  very  wide  discretion,  and 
so  long  as  they  keep  within  the  limits  of  fairness,  the  courts 
may  not  arbitrarily  interfere  with  or  control  the  manner  in 
which  they  shall  discharge  their  duty.^*  A  court  of  equity  may 
restrain  a  trustee  from  abusing  his  power,  but  it  can  not  control 
the  exercise  of  the  discretion  vested  in  him  by  the  trust  agree- 
ment.^*   Nor  will  a  trustee's  exercise  of  a  discretionary  power 

57  Brackett  v.  Middlesex  Bank  61  Campbell    v.    Virginia-Caro- 
Co.,  89   Conn.   645,  95  Atl.   12.           lina  Chem.  Co.,  68  S.  C.  440,  47 

58  Warren  v.  Pazolt,  203  Mass.       S.  E.  716. 

328,  89  N.  E.  381.  62  Keating  v.  Keating,  182  la. 

59  Shaw  V.  Bridgers,  161  N.  C.       1056,  165  N.  W.  74. 

246,  76  S.  E.  828.  63  Brackett  v.  Middlesex  Bank. 

60  Dickson  v.  N.  Y.  Biscuit  Co.,       Co.,  Supra. 
211  111.  468,  71  N.  E.  1058. 


i8o  Trusts  for  Business  Purposes. 

be  reviewed  by  the  court  unless  his  action  or  refusal  to  act  is 
arbitrary  and  unreasonable.^*  Where  a  discretionary  power  is 
conferred  on  trustees  to  alienate  real  estate  belonging  to  the 
trust,  a  court  of  equity  will  never  interfere  therewith  in  the 
absence  of  allegation  and  proof  of  actual  fraud  or  collusion  of 
the  parties  to  the  conveyance.^^ 

105 — Personal. 

Where  a  power  is  a  matter  of  personal  confidence  which  is 
to  be  executed  in  the  discretion  of  the  trustee,  it  cannot  be 
extended  beyond  the  express  words  and  clear  intention  of  the 
trustor,  and  cannot  be  exercised  by  a  trustee  appointed  by  the 
court  upon  the  death  of  the  original  trustee,^^  for  the  power 
conferred  upon  a  trustee  which  involves  personal  confidence  in 
him,  terminates  with  his  death.^'  Where  the  power  conferred 
on  the  trustee  is  not  a  personal  one,  but  is  one  belonging  to 
the  office  and  one  such  as  could  be  exercised  by  his  successor, 
then  the  power  survives  to  the  new  trustee  appointed.^^  A 
trustee  may  or  may  not  have  an  interest  or  share  in  the  trust 
property,  if  he  has,  he  may  convey  his  interest  just  the  same 
as  any  other  shareholder.^^  Generally,  a  trustee  may  resign 
at  any  time  and  so  a  resignation  in  the  manner  pointed  out  by 
the  trust  instrument  will  be  valid.''''' 


64  stein  V.   Safe  Dep.  &  Trust  68  Vernoy  v.  Robinson,  133  Ga. 
Co.,  127  Md.  206,  96  Atl.  349.  653,  66  S.  E.  928;  Jencks  v.  Safe 

65  Dickson  v.   New   Y.   Biscuit  Dep.   &  Trust   Co.,   120  Md.   626, 
Co.,  Supra.  87  Atl.  1031. 

eewhitaker    v.    McDowell,    82  69  Anderson     v.     Phegley,     57 

Conn.  195,  72  Atl.  938;   Woddrop  Ore.  172,  110  Pac.  975. 

V.  Weed,  154  Pa.  307,  26  Atl.  375.  70  Stearns  v.  Fraleigh,  39  Fla. 

67  Russell  V.  Hartley,  83  Conn.  603,  23   So.   18. 
654,  78  Atl.  320. 


Powers  of  Trustees.  i8i 


1 06 — Incidental. 


A  trustee  invested  with  the  control  of  property  and  not  ex- 
pressly or  impliedly  prohibited  from  incurring  expenses  for 
improvements,  may  make  improvements,  and  on  a  settlement  of 
his  account,  receive  credit  therefor.'^  Where  a  trust  deed  em- 
powers trustees  to  take  possession  of,  manage,  control,  lease, 
mortgage,  sell,  and  convey  the  land  constituting  the  trust  es- 
tate and  invest  the  proceeds  as  the  trustees  shall  deem  ad- 
visable, the  trustees  have  power,  in  consideration  of  the  lessee's 
covenant  to  place  buildings  on  the  land  which  would  enhance 
the  value  of  the  trust  estate,  to  give  option  to  a  purchase^^ 
Where  trustees  are  given  full  power  to  sell,  mortgage,  lease, 
and  reinvest  the  proceeds  in  their  discretion,  they  have  power 
to  buy  in  an  outstanding  claim  as  a  cloud  on  their  titleJ^  The 
doctrine  that  one  acting  in  two  different  capacities  cannot  con- 
tract with  himself  does  not  prevent  a  trustee  of  different  trust 
estates  from  transferring  securities  of  one  estate  to  himself  as 
trustee  of  another  estate.  If  he  acts  in  good  faith  within  the 
limits  of  his  authority,  and  the  full  value  of  the  securities  trans- 
ferred is  paid  by  one  estate  and  received  by  the  other,  and  the 
intention  to  transfer  title  is  carried  out  so  far  as  it  can  be 
without  making  a  formal  assignment,  the  transfer  will  be  re- 
garded in  equity  as  executed  as  against  a  subsequent  trans- 
feree who  wrongfully  obtains  the  securities  from  the  trustee.'* 

It  is  proper  for  the  trustee  to  cliarge  the  estate  with  the 
services  of  the  lawyers  engaged  to  draw  up  the  trust  instrument 
and  give  advice  concerning  the  accomplishment  of  the  object  of 

71  White  V.  Hall,  113  Va.  427,  73  Hull  v.  Chaffin,  54  Fed.  437. 
74   S.  E.  212.  74  French    v.    Hall,    198    Mass. 

72  Crown  v.  Cohn,  88  Ore.  642,  147,  84   N.  E.   438. 
172  Pac.  804. 


i82  Trusts  for  Business  Purposes. 

the  trustor.'^  A  trustee  lias  power  to  employ  counsel  to  assist 
in  the  management  of  the  trust,  and  to  burden  the  trust  estate 
with  a  lien  for  counsel's  servicesJ^  In  like  manner  the  trust 
estate  may  employ  counsel  either  to  resist  an  effort  to  remove 
a  trustee  without  cause  or  to  bring  about  a  removal  where  suffi- 
cient cause  is  shown;  and  procure  the  appointment  of  a  new 
trustee  in  place  of  the  one  so  removed.''  A  trustee  is  always 
charged  with  good  faith  and  discretion,  and  he  should  not  be 
penalized  for  settling  a  claim  which  in  the  exercise  of  good 
business  judgment  he  deemed  it  wise  to  settle.'^ 

107 — Restricted. 

Where  a  trust  provides  that  the  trustees  shall  at  all  times 
keep  the  premises  free  from  any  and  all  incumbrances  other 
than  a  mortgage  referred  to  in  the  deed,  the  execution  by  the 
trustees  of  another  mortgage  would  be  in  contravention  of  the 
trust  and  void.'^  While  a  trustee  has  power  to  make  whatever 
repairs  are  necessary  for  the  preservation  of  the  estate,  a  trus- 
tee of  land  under  a  deed,  not  expressly  authorized  to  make  large 
or  extensive  improvements,  has  no  power  to  erect  buildings 
thereon;  his  contract  therefor  is  not  binding  on  the  trust  es- 
tate.®°  If  trustees  lease  land  for  a  term  extending  unreason- 
ably beyond  the  period  that  the  trust  is  likely  to  continue,  the 
excess  only  will  be  void.^^     A  trustee  has  no  inherent  power 

75  Babbit  v.  Fidelity  Trust  Co.,  79  Gardiner  v.  Cord,  145  Cal. 
72  N.  J.  Eq.  745,  66  Atl.  1076.  157,  78  Pac.   544. 

76  Dolph  V.  Cincinnati  B.  &  C.  80  Maynard  v.  Columbus,  150 
R.  Co.,  56  Ind.  App.  137,  103  N.  Ky.  817,  150  S.  W.  1019. 

E.  14.  81  In    re    Hubbell    Trust,    135 

77Jessup  V.   Smith,   223   N.   Y.  la.   637,   113   N.   W.   512;    Gomez 

203,  119  N.  E.  403.  v.  Gomez,  81  Hun.  566,  31  N.  Y. 

78  Mann  v.  Day,  199  Mich.  88,  Sup.  206. 

165  N.  W.  643. 


Powers  of  Trustees.  183 

to  sell  the  trust  property,  either  expressly  or  by  clear  implica- 
tion ;  he  has  only  such  powers  as  are  given  by  the  instrument.^* 
A  trustee  has  no  authority  to  appoint  his  successor  unless  such 
authority  is  expressly  conferred  on  him.^^  A  trustee,  without 
express  authorization,  cannot  invest  the  funds  in  speculative 
stocks  without  personal  liability  ;8*  nor  can  he  take  money  com- 
mitted to  his  care  under  cover  of  an  investment  and  loan  it  to 
himself. ^^  Neither  can  a  trustee  by  his  own  voluntary  act, 
change  his  capacity  and  convert  himself  into  a  mere  debtor.^^ 
One  of  two  cotrustees  has  no  power  to  use  a  note  belonging  to 
the  trust  fund  which  is  payable  to  both  trustees  for  payment 
of  his  individual  debt,  nor  can  he  indorse  his  cotrustee's  name 
thereon  without  his  consent.^'' 

82  Wisdom  V.  Wilson,  127  S.  W.      589,  48  N.  E.   128. 

1128;  Crawford  v.  El  Paso  Land  85  Carrier  v.  Carrier,  226  N.  Y. 

Imp.  Co.,  Supra.  114,  123   N.  E.  135. 

83  Birmingham  Belt  R.  Co.  v.  86  Marshall     v.     Marshall,     11 
Gerganous,     142     Ala.     238,     37  Colo.  App.  505,   53   Pac.  617. 
South.  929.  87  Barroll  v.  Foreman,  88  Md. 

84  White   V.   Sherman,  163   111.  188,  40  Atl.  883. 


CHAPTER  X. 
DUTIES  OF  TRUSTEES. 

1 08 — To  Manage  Property  for  Shareholders. 

A  trustee  with  or  without  joint  beneficial  interest  in  the  trust 
property  is  accountable  only  for  the  management  of  the  prop- 
erty in  the  mode  pointed  out  by  the  settlor  in  the  trust  instru- 
ment, as  an  ordinarily  prudent  business  man  would  be  required 
to  do  under  like  circumstances.®*  He  performs  this  duty  by 
managing,  preserving,  improving,  and  keeping  the  property  in  a 
wav  that  will  be  beneficial  to  the  shareholders,  as  expressed  or 
implied  in  the  declaration  of  trust.*^  Just  so  is  it  the  duty  of 
a  trustee,  not  only  to  hold  and  manage  the  property  for  the 
shareholders,  but  also  to  disburse  the  proceeds  to  the  benefi- 
ciaries according  to  the  terms  or  circumstances  of  the  creation 
of  the  trust  in  and  out  of  the  estate.^"  Where  the  instnunent 
provides  for  the  continuing  of  business  so  long  as  a  certain 
profit  is  obtainable,  the  business  should  be  continued  by  the 
trustee  while  such  profit  is  being  obtained.^^ 

While  a  court  of  equity  may  empower  trustees  to  sell,  mort- 
gage, improve,  lease  or  otherwise  deal  in  property,  in  contem- 
plation that  expectant  interests  shall  be  carefully  safeguarded 
so  that  the  corpus  of  the  estate  shall  be  kept  intact  until  ter- 
mination of  the  trust;  still  the  only  change  permissible  is  in 

88  Wilson  V.  Smoot,  186  Ky.  cal  Union,  200  Ala.  23,  75  So. 
194,  216  S.  W.  129.  335. 

89  Wilson  V.  Smoot,  Supra.  91  In    re   Froelich's   Estate,    50 

90  Teal  V.   Pleasant  Grove  Lo-  Misc.   Rep.   103,   100   N.   Y.    Sup. 

436. 

(184) 


Duties  of  Trustees.  185 

the  form  of  the  property  for  the  purpose  of  conserving-  the 
principal.^2  a  trustee's  duty  is  to  the  trust  and  he  may  not 
abandon  the  trust  and  substitute  another  in  his  place  as  trustee, 
but  must  proceed  in  the  execution  of  the  trust  and  cannot  ter- 
minate it  by  his  act  or  default.^^  If  a  trustee  obtains  knowl- 
edge of  facts  that  would  defeat  the  title  of  the  beneficiaries 
and  give  it  to  another,  he  is  not  justified  in  communicating  the 
facts  to  the  other  person ;  his  duty  is  to  manage  the  property 
for  the  beneficiaries  and  not  make  admissions  prejudicial  to 
the  rights  of  the  beneficiaries.^*  Nor  can  a  trustee  rid  himself 
of  the  duty  to  warn  and  to  denounce,  if  there  is  improvidence 
or  oppression  which  he  may  discover.^^ 

109 — To  Carry  Out  the  Trust. 

It  is  the  duty  of  each  trustee,  and  of  the  court,  to  carry  out 
the  trust,  and  a  trustee  cannot  relieve  himself  of  this  duty  by 
agreement  with  his  co-trustees  to  look  after  only  certain  parts 
of  the  trust  property.^^  A  trustee  cannot  justify  his  failure  to 
perform  the  duties  of  the  trust  by  showing  that  no  one  asked 
him  to  perform  them.^'^  Being  the  agent  of  both  parties,  it  is 
his  duty  to  look  to  the  rights  and  interests  of  the  trust  debtor 
as  well  as  to  those  of  the  trust  creditor;  he  is  bound  to  act 
impartially  between  them.^^  A  trustee  must  invest  the  trust 
fund  as  directed,  so  that  it  may  yield  an  income  to  the  bene- 

92  Lee  V.  Albro,  91  Ore.  211,  Gas  &  Elec.  Co.,  224  N.  Y.  483, 
178  Pac.  784.  121   N.   E.   378. 

93  Anderson  v.  Pliegley,  57  Ore.  96  Hayes  v.  Pratt,  13  Sup.  Ct. 
172,  110  Pac.  975.  Rep.  503. 

94Boehmer    v.    Silvestone,    95  97  Cotton  v.  Rand  (Ky.),  92  S. 

Ore.  154,  186  Pac.  26.  W.  266. 

95  Globe   Woolen   Co.    v.   Utica  98  Hartman    v.    Evans,    38    Va. 

669,   18   S.   E.   810. 


i86  Trusts  for  Business  Purposes. 

ficiary;^^  if  it  becomes  necessary  in  carrying  out  the  trust  to 
employ  counsel  to  protect  the  trust,  it  may  be  done,  just  the 
same  as  it  is  the  duty  of  a  trustee  against  whom  legal  proceed- 
ings have  been  instituted  to  employ  counsel,  and,  as  incident 
thereto,  to  appropriate  so  much  of  the  trust  estate  as  is  neces- 
sary to  compensate  him  reasonably  for  his  services.  Even 
where  the  trustee  absconds,  and  so  loses  his  right  to  an  allow- 
ance for  services  and  counsel  fees,  as  between  the  trust  estate 
and  himself,  the  counsel  employed  by  him  has  a  right  of  action 
against  the  shareholders  to  whom  he  has  rendered  necessary 
and  beneficial  services.^®" 

When  the  trustees  carry  out  the  spirit  of  the  trust  and  con- 
duct the  business  along  the  same  general  lines  as  the  testator 
did  in  his  lifetime  or  according  to  the  will  of  the  trustor,  then 
it  may  be  said  that  the  trustees  are  fulfilling  their  trust  and  are 
free  from  attack  from  any  source.  This  principle  is  shown 
clearly  in  the  following  case  :^  One  Andrew  Froelich,  de- 
ceased, created  a  trust  estate  in  a  foundry  by  will ;  the  original 
trustee  having  resigned,  a  substitute  trustee  was  appointed  who 
kept  the  foundry  in  operation  under  the  trust.  The  substitute 
trustee  was  met  with  opposition  in  filing  his  accounts ;  the  lan- 
guage of  the  court  in  sustaining  the  trustee's  position  is  of  such 
import  that  it  is  given  herein  in  full : 

"The  substituted  trustee,  on  presenting  his  accounts  for  set- 
tlement, is  met  by  several  objections  which  will  be  taken  up  in 
the  order  in  which  they  are  stated,  as  follows :  First,  whether 
or  not  the  trustee  should  have  paid  rent  for  the  foundry  of  the 
deceased  for  the  use  of  the  same  in  carrying  on  the  business 

99  Smith  V.  Robinson,  83  N.  J.  i  In  re  Froelich's  Estate,  50 
Eq.  384,  90  Atl,  1063.                           Mis.    Rep.    103,    100    N.    Y.    Sup. 

100  Manderson    v.    Appeal,    113       436. 
Pa.  631,  6  Atl.  893. 


Duties  of  Trustees.  187 

of  the  deceased;  second,  whether  the  business  should  be  con- 
tinued by  the  substituted  trustee ;  third,  whether  the  trustee 
should  not  be  charged  with  the  amount  of  loss  arising  from  the 
conduct  of  the  business  during  the  administration;  fourth, 
whether  the  trustee  should  not  be  charged  with  salary  paid  to 
himself ;  fifth,  whether  the  trustee  should  not  be  charged  with 
the  entertainment  moneys  expended  by  him ;  sixth,  whether  or 
not  Caroline  Wolf  is  entitled  to  certain  rents  by  virtue  of  the 
decease  of  her  infant  daughter;  seventh,  whether  the  trustee  is 
entitled  to  commissions. 

Most  of  these  provisions  arise  in  consequence  of  a  trust 
which  was  created  by  the  deceased  and  which  directed  the  trus- 
tees to  use  all  the  property  pertaining  to  such  business  as  was 
left  by  the  testator  for  that  purpose.  There  was  also  a  fur- 
ther provision  which  gave  all  of  the  residuum  of  the  estate  to 
the  trustees,  to  collect  the  rents  and  income  therefrom  and  pay 
the  same  to  certain  beneficiaries  designated  by  the  deceased.  It 
appears  that  part  of  the  estate  of  the  deceased  was  a  certain 
foundry,  and  the  trustees,  in  their  management  of  the  estate, 
charged  against  the  business  the  rent  for  the  foundry  and  paid 
the  amount  so  charged  into  the  trust  of  the  residuum  of  the 
estate.  The  present  trustee  has  refused  to  do  this,  and  con- 
tends that,  while  the  method  adopted  by  the  preceding  trustees, 
under  which  this  was  done,  produced  no  harm  either  to  the 
estate  or  to  the  beneficiaries  thereunder,  there  was  no  obligation 
upon  him  to  do  the  same,  as,  when  the  testator  gave  all  of  the 
property  pertaining  to  his  business  in  trust  to  continue  the 
said  business,  he  must  necessarily  have  included  the  foundry. 

I  think  this  contention  is  correct.  There  is  no  more  reason 
why  the  trustees  should  charge  themselves  with  rent  for  the 
foundry  than  there  is  that  they  should  charge  themselves  for 
the  hire  of  the  various  tools  and  ai)pliances  required  in  such 


i88  Trusts  for  Business  Purposes. 

business.  It  will  be  observed,  of  course,  tbat  the  net  result  to 
the  beneficiaries  under  the  trust  is  not  afifected,  no  matter  which 
course  is  adopted,  as  in  the  one  case  it  simply  means  that  the 
income  derived  from  the  trust  pertaining  to  the  real  estate  is 
larger,  whereas  in  the  other  case  it  means  that  the  income  de- 
rived from  the  trust  in  regard  to  the  business  is  the  larger. 
In  other  words,  this  is  solely  a  matter  of  bookkeeping.  But 
the  real  importance  of  the  question  arises  in  connection  with 
the  proviso  in  relation  to  the  carrying  on  of  the  business,  which 
directs  that  the  same  shall  be  discontinued  when  the  trustees' 
management  of  the  business  fails  to  produce  a  certain  amount 
of  profit ;  and  the  question,  therefore,  of  what  are  the  run- 
ning expenses  of  such  business,  becomes  very  important  in  de- 
termining whether  the  trustees  have  continued  such  business 
for  a  longer  period  than  was  permitted  by  the  testator. 

The  disposal  of  the  above  question  practically  disposes  of  the 
second  question  as  to  whether  the  limitation  under  which  the 
business  was  to  be  conducted  has  been  reached  or  not,  as,  if  the 
amount  which  has  been  charged  up  for  rent  be  held  not  to  be 
one  of  the  expenses  of  such  business  within  the  contemplation 
of  the  deceased,  then  the  limitation  contained  in  his  will  has 
not  been  reached.  In  this  connection  I  might  say  there  are  sev- 
eral items  charged  as  expenses  of  the  business  which,  in  my 
judgment,  should  not  be  regarded  as  rumiing  expenses  but  as 
items  in  the  way  of  renewal.  These  items  are  in  the  nature  of 
the  purchase  of  new  horses  and  other  matters  of  that  kind. 

no — Substituted   Trustee  May  Follozv  Business  Methods  of 
Predecessor. 

As  to  the  question  of  the  loss  incurred  in  the  business  during 
the  administratorship  of  the  substituted  trustee,  it  appears  that 


Duties  of  Trustees.  189 

there  is  no  direct  proof  that  there  has  been  any  loss  occasioned 
by  any  lack  of  attention  on  the  part  of  svich  trustee,  and  the 
contestant  is  the  last  person  in  the  world  in  a  position  to  make 
any  such  suggestion.  Her  doing  so  is  one  of  the  most  amazing 
pieces  of  affrontery  tliat  has,  in  my  judgment,  ever  been  dis- 
played in  a  court  of  justice.  The  contestant,  the  widow  of  the 
deceased,  was  originally  one  of  the  trustees.  As  such  trustee, 
she  was  allowed  to  receive  10  per  cent  of  the  profits  of  the  busi- 
ness for  her  compensation  in  managing  the  same.  It  appears, 
also,  that,  instead  of  taking  personal  control  and  management 
of  such  business,  she  employed  one  Wolf  to  manage  the  same 
for  her,  for  which  he  was  paid  a  large  salary.  The  present 
substituted  trustee,  who  is  her  son,  occupied  a  subordinate  posi- 
tion in  the  business.  After  a  period  of  time,  it  appears  the 
contestant  married  this  man  Wolf.  Subsequently  she  rendered 
her  account  as  trustee  and  resigned.  With  the  money  for  the 
commissions  which  were  due  her  a  new  company  was  formed, 
in  which  Wolf,  her  husband  and  foreman  of  the  business  of 
the  deceased,  was  the  president,  but  to  which  he  did  not  con- 
tribute a  dollar  of  his  own  money.  He  immediately  started 
such  business  in  active  opposition  to  the  business  which  he  had 
been  managing  for  her  when  she  was  trustee  of  this  estate. 

It  was  under  these  circumstances  that  the  son  of  the  deceased 
was  appointed  a  substituted  trustee.  He  has  taken  charge  of 
the  same  and  run  it  to  the  best  of  his  ability.  There  is  not  a 
particle  of  testimony  as  to  any  specific  act  of  neglect  or  omis- 
sion on  his  j>art,  or  any  suggestion  that,  under  any  other  kind 
of  management,  under  the  peculiar  circumstances  which  he  had 
to  contend  with,  any  better  results  could  have  been  obtained, 
other  than  the  fact  that  the  receipts  of  the  business  under  his 
management  have  not  been  as  great  as  under  that  of  the  pre- 
vious trustee.     To  permit  this  contestant,  the  former  trustee. 


190  Trusts  for  Business  Purposes. 

who,  as  the  tool  of  her  husband,  is  doing  her  utmost  to  destroy 
this  business,  to  use  so  much  of  the  destruction  she  has  wrought 
as  a  means  of  punishing  her  son,  is  in  my  judgment  absolutely 
without  reason.  If  there  is  any  person  who  should  merit  the 
censure  of  the  court,  it  is  the  mother  who  would  treat  her  son 
in  any  such  unnatural  way  as  this  and  the  man  who  would  use 
the  means  obtained  by  his  marriage  in  endeavoring  to  destroy 
the  property  left  by  his  predecessor,  the  first  husband  of  this 
woman. 

The  statement  of  this  question  brings  us  to  the  proposition 
contained  in  the  fourth  objection.  As  I  have  stated,  the  con- 
testant got  her  commissions  in  full,  and  her  husband,  who  had 
practically  performed  her  own  work,  also  received  a  salary  as 
manager  of  the  company.  The  substituted  trustee  did  not  at- 
tempt to  obtain  his  money  by  any  such  subterfuge  as  that,  but 
increased  his  salary  which  he  had  been  getting  while  working 
in  that  business,  though  to  a  sum  which  was  much  less  than 
that  which  had  been  previously  drawn  by  his  stepfather.  I 
appreciate  the  contention  that  the  commissions  of  an  executor 
or  trustee  are  the  ordinary  measure  of  his  compensation.  But 
where  this  estate  had  been  run  for  years  with  the  concession 
that  it  was  necessary  to  have  a  manager  for  the  business,  and 
where  this  trustee  simply  carried  on  the  practice  adopted  by 
the  prior  trustee  at  a  reduced  expense  to  the  estate,  it  does  not 
seem  to  me  that  it  can  now  be  urged  for  the  first  time  that  such 
a  salary  should  not  be  permitted.  Certainly  this  contestant, 
who  has  not  only  benefited  by  this  course,  but  to  an  extent 
which  enables  her  to  go  into  a  business  to  destroy  that  left  by 
the  testator,  is  the  last  person  who  should  be  given  any  serious 
consideration  by  a  court  of  justice  in  her  views  on  the  subject. 
The  determination  of  this  question  will,  therefore,  dispose  of 


Duties  of  Trustees.  191 

the  seventh  objection  in  relation  to  the  commissions  of  this 
substituted  trustee. 

The  fifth  proposition  is  in  relation  to  what  is  known  as 
entertainment  moneys.  It  appears  to  have  been  conceded  since 
the  death  of  the  testator  that  in  the  conduct  of  the  business  it 
was  necessary  that  certain  items  should  be  expended  for  the 
entertainment  of  buyers  in  order  that  by  so  doing  their  good 
will  could  be  secured.  This  practice  has  been  recognized  by 
expenditures  which  have  been  approved  of  in  all  of  the  pre- 
vious accounts  and  has  been  continued  by  the  substituted  trus- 
tee herein.  There  is  nothing  to  show  that  the  amounts  which 
he  expended  have  been  improper  or  incorrect.  It  stands  to 
reason  that  such  items  cannot  necessarily  be  accompanied  by 
vouchers,  so  that  the  trustee  could  give  a  careful  statement  in 
regard  to  the  same,  as  he  would  do  in  the  case  of  the  ordinary 
items  of  an  executor's  or  administrator's  account.  It  is  but 
fair  to  assume  that,  as  this  was  a  practice  which  was  carried  on 
by  the  business  during  the  life  of  the  testator  who,  in  directing 
his  trustees  to  carry  on  such  business,  appreciated  that  this 
would  be  a  necessary  matter  for  them  to  attend  to  in  order  that 
the  business  might  be  managed  with  the  same  degree  of  profit 
as  was  attained  during  his  lifetime." 

Ill — To  Account. 

A  trustee  may  be  held  to  a  strict  accounting  and  to  the  exer- 
cise of  the  utmost  fidelity  towards  the  beneficiaries.'  Where  he 
is  called  upon  to  account,  the  burden  of  making  a  proper  ac- 
counting is  upon  him,  and  upon  his  failure  to  do  so  all  in- 
tendments are  against  him.^     So  a  trustee  may  be  called  upon 

2  Arnold  v.  South.  Pine  Lum.  3  Stockwell       v.       Stockwell's 

Co.    (Tex.  Civ.  App.),  123  S.  W.      Estate,  92  Vt.  489,  105  Atl.  30. 
1162. 


192  Trusts  for  Business  Purposes. 

to  account  for  a  single  item  or  transaction,  and  is  not  relieved 
by  showing  that  for  other  items  he  was  not  liable.*  A  trustee 
who  has  once  actually  received  the  funds  of  the  trust  estate  can- 
not discharge  himself  from  accounting  to  the  shareholders  by 
showing  they  were  lost  by  his  own  neglect.  In  such  case  a 
suit  against  him  by  the  shareholders  to  recover  the  estate  is 
not  based  upon  his  neglect,  but  upon  his  actual  receipt  of  the 
estate ;  the  case  is  not  varied  if  the  suit  be  against  the  devisee 
to  the  delinquent  trustee.^  If  a  trustee  uses  the  balances  of 
the  trust  funds  for  his  own  benefit,  without  accounting  for  the 
profits  so  realized,  he  may  be  cliarged  with  all  profit  and  re- 
moved for  breach  of  trust.^  For  where  a  trustee  by  fraud  or 
concealment  makes  a  profit  out  of  the  sale  of  the  trust  prop- 
erty, the  profit  belongs  exclusively  to  the  beneficiary;  but  it  is 
necessary  to  show  that  the  profit  was  made  at  the  beneficiary's 
expense,  and  that  it  was  part  of  his  property  and  would  have 
been  gained  by  him  had  the  trustee  performed  his  duties."" 

Where  a  trustee  purchases  bonds  with  trust  funds  and  turns 
them  over  to  the  trust  estate  at  an  enhanced  price — treating  the 
difference  as  his  individual  profit — the  investment  must  be 
regarded  as  the  estate's  from  the  time  of  the  purchase.^  In  an 
action  for  an  accounting  where  the  trustees  admit  they  have 
received  the  property,  the  burden  is  on  them  to  show  that  they 
liave  exercised  reasonable  skill,  prudence,  and  judgment;^  for 
the  trustees  must  prove  the  credits  claimed, ^°  and  that  services 

4  Joseph    V.    Herzig,    135    App.  Va.  648,  66  S.  E.  859. 

Div.  141,  120  N.  Y.  Sup.  34.  8  Campbell  v.  Campbell,  8  Fed. 

SLindsley   v.    Dodd,    53    N.    J.  460. 

Eq.  69,  30  Atl.  896.  9  Ashley  v.  Wlnkley,  209  Mass. 

6  Bobb  V.  Bobb,  89  Mo.  411,  4  509,  95  N.  E.  932. 

S.   W.   511.  10  Stockwell  v.  Stockwell's  Es- 

7  Heckscher    v.     Blanton,    111      tate,  Supra. 


Duties  of  Trustees.  193 

performed  by  counsel  were  for  the  trust  estate  and  not  for 
themselves  individually.^^ 

112 — To  Keep  Books. 

A  trustee  must  keep  accurate  accounts  of  all  his  transactions 
and  render  a  true  statement  supported  by  proper  vouchers ;  if 
he  does  not,  every  presumption  of  fact  is  against  him  and  he 
cannot  impose  upon  the  shareholders  the  obligation  to  prove 
that  he  has  actually  received  what  he  should  have  received,  or 
that  he  has  not  expended  what  he  claims  to  have  paid  out.^^  It 
is  the  duty  of  a  trustee  to  keep  a  true  and  accurate  account  of 
his  trust  and  make  due  and  proper  reports  thereof,  and  make 
payments  due  without  delay.^^  Where  a  trustee  has  negligently 
failed  to  keep  true  accounts  or  has  refused  to  account,  all  pre- 
sumptions are  against  him  on  a  settlement.^*  Where  he  fails 
to  keep  his  accounts  in  an  intelligent  manner,  the  penalty  is  to 
cliarge  him  with  the  value  of  the  use  of  the  trust  property  for 
the  purpose  to  which  it  is  devoted,  and  to  credit  the  sum  with 
legitimate  expenses  and  reasonable  compensation.^^ 

113 — To  Use  Prudence  and  Care. 

A  trustee  must  use  such  care  for  the  safety  of  the  trust  fund 
as  a  man  of  ordinary  prudence  might  use  in  business  of  a 
similar  nature;  he  is  held  to  a  strict  accountability  for  a  faith- 


11  Mann  v.  Day,  199  Mich.  88,  well  v.  Stockwell's  Estate, 
165  N.  W.  643.  Supra. 

12  Red  Bud  Realty  Co.  v.  14  Bone  v.  Hayes,  154  Cal.  759, 
South.,  96  Ark.  281,  131  S.  W.  99  Pac.  172;  Smith  v.  Robinson, 
340.  S3  N.  J.  Eq.  384,  90  Atl.  1063. 

13  Smallwood  v.  Lawson,  183  15  Wilson  v.  Smoot,  186  Ky. 
Ky.   189,   208    S.  W.   808;    Stock-  194,  216  S.  W.  129. 


194 


Trusts  for  Business  Purposes. 


fill  performance  of  the  duties  of  his  trust.^^  It  is  not  required 
that  the  trustee  exercise  extraordinary  care,  but  only  the  care 
required  of  a  man  of  common  prudence  in  his  own  business  ;^'' 
for  he  is  not  an  insurer  of  the  property  or  a  guarantor  of  any 
income  therefrom,  and  will  be  held  to  the  use  of  only  ordinary 
care  in  making  it  income-producing. ^^  A  trustee's  obligation  to 
his  trust  is  satisfied  by  the  exercise  of  the  same  degree  of  dili- 
gence that  a  man  of  ordinary  caution  would  be  expected  to 
exercise  in  the  care  of  his  own  property  under  the  same  circum- 
stances.^^ Whether  a  trustee  exercises  common  prudence  in  any 
particular  case  is  a  question  for  the  jury  ^^^  when  he  is  wanting 
in  common  prudence  in  the  management  of  the  trust  fund  and 
a  loss  results,  he  will  be  surcharged.^^ 

114 — To  Exercise  Good  Faith  and  Sound  Discretion. 

In  the  general  management  of  the  trust,  the  trustees  are  not 
liable  for  the  consequences  of  an  error  in  judgment,  unless  the 
error  is  such  as  to  show  that  either  they  acted  in  bad  faith  or 
failed  to  exercise  sound  discretion. ^^  Good  faith  and  sound  dis- 
cretion, as  those  terms  are  understood  by  reasonable  men  of 
good  judgment,  are  the  standard  by  which  the  conduct  of  trus- 


16  Boehmer  v.  Silvestone,  95 
Ore.  154,  186  Pac.  26;  Wylie  v. 
Bushnell,  277  111.  484,  115  N.  E. 
618,  Winder  v.  Nock,  104  Va. 
759,  52  S.  E.  561;  Bourquin  v. 
Bourquln,  120  Ga.  115,  47  S.  E. 
639. 

17  Klugh  V.  Seminole  Secur- 
ities Co.,  103  S.  C.  120,  87  S.  E. 
644. 

18  Dillivan  v.  German  Sav. 
Bank  (la.),  124  N.  W.  350;  In  re 
Darlington's  Estate,  245  Pa.  212, 


91  Atl.  486. 

19  American  Bonding  Co.  v. 
Richardson,  214   Fed.  897. 

20  Klugh  V.  Seminole  Secur- 
ities Co.,  Supra. 

21  In  Re  Hart's  Estate,  203  Pa. 
480,   53   Atl.  364. 

22  Taft  V.  Smith,  186  Mass.  31, 
70  N.  E.  1031;  Klugh  v.  Seminole 
Securities  Co.,  Supra;  Dillivan 
V.  German  Savings  Bank,  Supra; 
Clay  V.  Thomas,  178  Ky.  199,  198 
S.   W.   762. 


Duties  of  Trustees.  195 

tees  is  to  be  measured. ^^  Whether  a  trustee  acts  in  good  faith 
and  exercises  sound  discretion  will  be  determined  with  refer- 
ence to  the  situation  at  the  time  of  the  transaction,  and  not  in 
the  light  of  subsequent  events  which  could  not  have  been 
reasonably  anticipated.^*  Where  the  trust  instrument  leaves 
large  discretion  in  the  management  of  the  trust  to  the  trustees, 
it  is  not  within  the  province  of  the  court  to  direct  them  how 
to  exercise  such  discretion ;  it  is  their  duty  to  use  their  own 
discretion,  in  the  exercise  of  which,  within  legal  limitations, 
they  will  be  protected. ^^  But  the  burden  of  proof  of  the  "exer- 
cise of  good  faith  and  sound  discretion"  is  cast  upon  the  trus- 
tee, under  the  peculiar  facts  in  a  case;^^  and  though  a  trustee  is 
required  to  exercise  good  faith  and  reasonable  diligence,  he  is 
not  an  insurer  against  losses  occasioned  by  the  bad  faith  of  his 
co-trustee.'^' 

The  rule  is  that  trustees  are  bound  to  a  fair  exercise  of  their 
judgment  and  to  the  unselfish  exercise  of  good  faith;  while 
supine  negligence  or  wilful  default  will  render  them  liable,  mere 
errors  of  judgment  will  not.'^^  But  where  the  trustee  acts  in 
good  faith  and  employs  such  vigilance,  sagacity,  diligence,  and 
prudence  as,  in  general,  prudent  men  of  discretion  and  intelli- 
gence employ  in  like  matters  in  their  own  affairs,  they  are  not 
responsible  for  errors  of  judgment.^^  They  must,  however, 
follow  the  terms  prescribed  by  the  deed  of  trust,  and  if  there 

23  Kimball     v.     Whitney,     233  Dep.  &  Trust  Co.,  82  N.   J.  Eq. 

Mass.  321,  123  N.  E.  665.  518,  91  Atl.  734. 

24Taft  V.  Smith,  Supra;   War-  27  In    re    Adams'    Estate,    221 

ren  v.  Pezolt,  203  Mass.  328,  89  Pa.  77,  70  Atl.  436. 

N.  B.  381.  28  Ainsa    v.    Mercantile    Trust 

25Bartlett    v.    Pickering,     113  Co.,  174  Cal.  504,  163  Pac.  898. 

Me.  96,  92  Atl.  1008.  29  Costello  v.   Costello,   209    N. 

26  Beam     v.     Patterson     Safe  Y.  252,  103  N.  E.  148. 


196  Trusts  for  Business  Purposes. 

is  any  material  failure  in  this  regard,  their  acts  may  be  invalid, 
or  they  may  be  guilty  of  a  breach  of  trust.^" 

30  McCaughn  v.  Young,  85  Miss.  277,  37  So.  839. 


CHAPTER  XL 
LIABILITY  OF  TRUSTEES. 


115 — Personal. 


A  trustee  acting  in  his  fiduciary  capacity  without  properly 
Hmiting  his  liability  will  be  held  personally  bound  by  contracts 
he  makes  as  such  trustee;  the  mere  use  of  the  name  of  trustee 
will  not  discharge  him,  but  to  protect  himself  from  individual 
liability  he  must  expressly  stipulate  therefor  ;^^  for  in  the  ab- 
sence of  special  limitation,  a  contract  by  a  trustee  relative  to  the 
trust  property  binds  him  personally.^^  The  rule  seems  to  be 
that  a  trustee  holding  a  trust  estate,  with  general  power  of 
management,  is  personally  bound  by  contracts  which  he  makes 
as  trustee,  unless  there  is  an  express  provision  showing  that 
both  parties  agree  to  relieve  him  from  personal  liability.^'  If 
a  trustee  contracts  with  a  broker  to  sell  property,  without  ref- 
erence to  the  capacity  in  which  he  holds  it — omitting  to  exempt 
himself  from  personal  liability — ^and  the  broker  intends  in  good 
faith  to  look  to  the  trustee  individually  for  his  commission  with- 
out regard  to  the  manner  or  capacity  in  which  he  might  con- 
vey the  property,  the  trustee  is  personally  bound.^*  So  where 
trustees  contract  for  work  and  material  on  a  building  and  do 
not  exempt  themselves  from  personal  responsibility  or  provide 

81  Feldman     v.     Preston,     194  217  Mass.  438,  105  N.  E.  445, 

Mich.  352,  160  N.  W.  655;   Bried  33  Knipp    v.    Bagby,    126    Md. 

V.    Mintrup,    203    Mo.    App.    567,  461,  95  Atl.  60. 

219    S.   W.   703.  34  Bried    v.    Mintrup,    Supra; 

32  Hussey  v.  Arnold,  185  Mass.  Knipp  v.  Bagby,  Supra. 
202,  70  N.  E.  87;   Carr  v.  Leahy, 

(197) 


198  Trusts  for  Business  Purposes. 

that  the  other  party  look  to  the  trust  estate  for  payment,  by 
adding  the  word  "trustee"  to  their  names,^^  they  are  bound 
personally. 

If  trustees,  in  transferring  a  trust  estate,  violate  any  legal 
or  equitable  duty  or  contravene  principles  which  the  law 
cliarges  them  to  observe,  to  the  beneficiaries'  injury,  they  are 
guilty  of  constructive  fraud,  regardless  of  their  motive  or  in- 
tention ;  a  purpose  to  defraud  is  not  essential  to  constructive 
fraud  as  the  law  regards  the  act  which  gives  rise  thereto  as 
fraudulent  per  se.^^  But  the  fact  alone  that  a  trustee  is  without 
authority  to  bind  the  estate  will  not,  of  itself,  render  him 
personally  liable  upon  executory  contracts  where  no  such  lia- 
bility was  intended  by  either  party. ^'  A  trustee  who,  in  a  set- 
tlement out  of  court,  allows  illegal  credits  upon  the  account  of 
his  predecessor,  will  be  liable  to  the  shareholders  for  the 
amount  so  allowed.^^  So  a  trustee  who  pays  out  trust  funds 
pursuant  to  the  court's  direction  outside  the  scope  of  any 
subject-matter  of  such  court's  jurisdiction  is  personally  respon- 
sible therefor.^^  A  trustee  who  has  converted  trust  funds  to 
his  own  use,  by  investing  them  in  his  own  name,  may  be  held 
for  the  conversion,  the  investment  proving  unprofitable.  It  is 
not  a  sufficient  excuse  for  purchasing  in  his  own  name  that  he 
might  want  to  sell  without  the  delay  of  an  application  to  the 
court.*" 

One  of  the  leading  cases  in  which  a  trustee  was  held  liable 
for  the  debts  of  the  trust  is  Connally  v.  Lyons  ;*^  herein  the 

35  Philip  Carey  Co.  v.  Pingree,  39  Cowie    v.    Strohmeyer,    150 

223  Mass.  352,  111  N.  E.  857.  Wis.  401,  136  N.  W.  956. 

36Costello  V.   Costello,   209   N.  40  White   v.    Sherman,   163    111. 

Y.  252,  103  N,  E.  148.  589,   48   N.   E.   128. 

37  Bried  v.  Mintrup,  Supra.  41  82   Tex.    664,   18    S.  W.    799, 

38  Ashley  v.  Holman,  44   S.  C.  27  Am.  St.  Rep.  935. 
145,   21   S.   E.   624. 


Liability  of  Truste;es.  199 

[CONNALLY    v.    LYONS.] 

trustee  made  no  effort  to  limit  his  liability  to  the  trust  estate 
or  to  the  business  of  the  trust.  The  plaintiff  Lyons  knew  that 
the  business  was  being  carried  on  as  a  trust,  but  that  in  itself 
was  not  sufficient  to  enable  the  trustee  to  escape  liability.  It 
is  necessary  for  the  trustee,  not  only  to  have  his  liability  lim- 
ited in  the  trust  agreement  at  the  time  of  his  appointment,  but 
also  to  bring  this  home  to  the  people  with  whom  he  contracts ; 
and  if  that  had  been  done  in  this  case,  the  question  of  personal 
liability  of  the  trustee  would  have  been  entirely  eliminated. 
The  facts  and  the  opinion  in  the  case  are  summarized  as 
follows : 

Action  by  W.  H.  Lyons  &  Company  against  Nathan  Con- 
nally  to  recover  the  value  of  merchandise;  judgment  for  the 
plaintiffs;  defendant  appeals;  affirmed.  On  February  25,  1875, 
M.  A.  T.  Connally  executed  and  delivered  a  written  instrument 
conveying  her  entire  mercantile  business  to  her  father,  C.  P. 
Connally,  in  trust,  to  conduct  the  business  until  the  grantor's 
youngest  brother  would,  if  living,  be  25  years  of  age,  when 
the  property,  with  its  increase,  was  to  be  divided  among  the 
beneficiaries.  The  grantor  reserved  to  herself  a  ninth  un- 
divided interest,  with  power  to  draw  it  out  at  will,  and  gave 
to  her  father  one-ninth  absolutely,  and  to  each  of  her  brothers 
one-ninth ;  and  the  deed  provided  that  the  father  might,  at  his 
option,  pay  to  any  one  of  the  brothers  the  share  of  such 
brother.  The  father  was  to  receive  $1000  per  annum  for  his 
services;  none  of  the  brothers  were  to  have  power  to  force  a 
settlement  until  the  expiration  of  the  trust. 

On  March  24,  1882 — C.  P.  Connally,  the  father,  having  died 
previously — the  district  court  of  Hopkins  County  appointed 
defendant  Nathan  Connally,  who  was  one  of  the  beneficiaries, 
as  trustee.  Defendant  accepted  the  appointment  and  continued 
to  operate  the  business  in  the  name  of  Connally  &  Company 


200  Trusts  for  Business  Purposes. 

[CX)NNALLY   v.    LYONS.] 

under  which  it  had  been  carried  on  by  the  prior  trustee,  until 
January  20,  1886,  when  the  property  was  attached.  A  few 
days  before  the  attachment,  defendant,  acting  for  Connally  & 
Company,  drew  from  the  bank  $4,286,  and  it  does  not  appear 
what  disposition  was  made  thereof. 

116 — Partnership  Liability  Not  Applicable  to  Beneficiaries. 

The  decision,  in  the  main,  follows :  Appellant's  first,  second 
and  eighth  assignments  of  error  raise  the  question  of  parties  as 
presented  by  his  exceptions  to  the  petition,  but  only  on  the 
ground  tliat  the  persons  who  were  claimed  to  be  necessary  par- 
ties were  such  as  beneficiaries  in  a  trust,  and  not  as  partners. 
If  Connally  &  Company  were  a  partnership,  all  of  the  partners 
would  be  necessary  parties  to  an  action  of  debt  for  the  price  of 
the  goods.  It  is  not  necessary  to  consider  whether  they  would 
be  in  a  suit  for  the  value  of  the  goods,  if  the  possession  thereof 
was  obtained  by  the  fraudulent  representations  of  the  defend- 
ant, because  the  court  arrived  at  no  conclusion  that  the  goods 
were  fraudulently  obtained.  But  if  Connally  &  Company  was 
a  trust  estate,  managed  by  the  defendant  as  trustee,  it  is  clear 
that  the  beneficiaries  of  the  trust  would  not  be  necessary  parties 
to  a  suit  for  a  debt  incurred  in  the  management  of  the  trust  if 
the  trustee  should  be  personally  liable  therefor ;  and  this  ques- 
tion will  be  considered  under  another  assignment  raising  that 
question.  Mere  participation  in  profits  does  not  constitute  a 
partnership,  although  there  should  be  a  contract  from  v/hich 
they  were  derived.'*^  There  was  no  contract  of  partnership  in 
this  case.  The  defendant,  Nathan  Connally,  acted  as  trustee 
under  an  appointment  from  the  court,  and  had  the  entire  control 
and  sole  management  of  the  business.     There  was  no  right  of 

48Buzard  v.  Bank,  67  Tex.  89,     2  S.  W.  Rep.  54. 


Liability  oi^  Trusteeis.  201 

[CONNALLY    v.    LYONS.] 

control  whatever  reserved  in  the  instrument  executed  by  M.  A. 
T.  Connally  to  her  father,  C.  P.  Connally,  as  trustee,  either  for 
herself  or  for  the  beneficiaries  as  such.  A  test  of  partnership 
is  the  right  of  control  over  the  property  or  profits,  or  to  make 
disposition  thereof. *3  Inhere  was  no  right  whatever  in  the 
brothers  of  the  grantor,  who  were  beneficiaries  therein,  either 
to  control  or  withdraw  their  several  interests.  From  the  terms 
of  the  instrument,  the  business  was  to  be  conducted  until  the 
youngest  was  25  years  of  age,  or,  if  he  died  before  that  time, 
to  such  a  time  as  he  would  have  been  25  if  he  had  lived.  We 
must  also  infer  that  at  least  some  of  the  beneficiaries  were 
minors,  and  it  will  not  be  contended  that  they  could  be  partners, 
although  the  instrument  might  indicate  a  partnership.  The 
finding  of  the  court  is  further  strengthened  by  the  fact  that 
there  is  no  instrument  of  facts  brought  up  with  the  record,  and 
there  may  have  been  proof  of  other  facts  to  sustain  his  con- 
clusion that  Nathan  Connally  was  the  trustee  of  a  trust  estate. 
We  think,  however,  that  a  proper  construction  of  the  instru- 
ment alone  would  lead  to  the  same  conclusion.  There  was  no 
evidence  to  make  the  beneficiaries  partners  by  holding  out,  but 
such  a  partner  would  not  be  a  necessary  party. 

117 — Mere  Knowledge  of  Creditor  Not  Sufficient  to  Exempt 
Trustee  from  Personal  Liability. 

Appellant's  ninth  and  tenth  assignments  of  error  are  as  fol- 
lows: The  court  erred  in  its  conclusions  of  fact  and  law  in 
finding  the  estate  of  Connally  &  Co.  was  a  trust  estate  and 
Nathan  Connally  was  trustee  of  same;  and  finding,  'further, 
that  goods,  wares,  and  merchandise  mentioned  in  plaintiflf's 
petition  were  sold  and  delivered  to  Connally  &  Co.  by  plaintiffs, 

43  1  Bates,  Partn.  Sec.  37. 


202  Trusts  for  Business  Purposes. 

rCONNALLY   v.    LYONS.] 

and  then  rendering  judgment  against  defendant,  Nathan  Con- 
nally,  for  the  debt  here  sued  on.  The  court  erred  in  its  finding 
of  law  that  defendant,  Nathan  Connally,  would  be  liable  for 
said  debt  personally  because  he  failed  to  make  a  contract  with 
plaintiff  exempting  him  from  said  liabilities. 

As  we  are  of  the  opinion  that  a  trust  estate  was  created  by 
the  instrument  of  conveyance  from  M.  A.  T.  Connally  to  her 
father,  C.  P.  Connally,  it  remains  only  to  consider,  under  the 
above  assignments,  whether  or  not  the  trustee,  the  defendant, 
was  personally  liable  for  the  goods  purchased  by  him  for  the 
trust  estate  from  plaintiffs.  Trustees  of  a  corporate  body,  with 
defined  powers,  are  not  personally  liable,  and  such  has  been  the 
recognized  rule  in  this  state  from  the  early  decisions.**  But 
whether  or  not  the  trustee  of  a  voluntary  association  or  a  trust 
estate  is  personally  liable  has  not  been  before  our  supreme  court 
in  any  case  that  we  can  find.  That  such  trustees  should  be  held 
personally  liable  is  reasonable,  because  they  have  in  their  own 
hands  the  means  wherewith  to  reimburse  themselves,  and 
should  not  assume  a  debt  for  the  benefit  of  an  estate  of  which 
they  have  the  sole  management  and  control,  without  prospect 
of  funds  for  payment  thereof.  If  this  principle  needed  to  be 
enforced  by  way  of  illustration,  it  may  be  done  by  the  fact  that 
the  defendant,  a  few  days  before  the  attachment,  withdrew 
from  the  bank  the  deposit  of  Connally  &  Company  amounting  to 
over  $4,000  in  cash.  In  Hill  on  Trustees  (533)  the  doctrine 
is  broadly  stated  that  "a  trustee  who  carried  on  any  trade  with 
the  trust  assets  for  the  benefit  of  the  cestuis  que  trustent.  will 
be  responsible  to  the  creditors,  not  only  to  the  extent  of  the 
trust  assets,  but  also  with  the  whole  of  his  own  property;  and 

44  Traynham     v.     Jackson,     15      McHugh,  39  Tex.  348;   Snyder  v. 
Tex.  170,  65  A.  D.  152;    Dyer  v.      Wiley,  59  Tex.  449. 
Sullivan,  18  Tex.  771;  College  v. 


Liability  oi^  Trustees.  203 

[CONNAI.LY    V.    LYONS.] 

he  may  be  made  bankrupt  and  proceeded  against  in  the  same 
manner  as  any  other  trader;  it  is  immaterial  that  the  trade  is 
carried  on  by  him  in  consequence  of  an  express  direction  in 
the  trust  instrument,  although  the  trust  property  will  doubtless 
be  primarily  liable  to  the  creditors,  and  will  be  first  applied  so 
far  as  it  will  go  in  discharge  of  the  liabiHties."  Purchases  by 
trustees,  when  made  in  obedience  to  the  trust,  impose  upon  them 
a  personal  liability.  The  seller  must  look  to  them  for  payment, 
and  they  must  look  to  the  trust  estate  for  reimbursement. *5 

Although  the  plaintiffs  knew  that  the  defendant  was  conduct- 
inf?  the  mercantile  business  of  which  he  had  the  control  and 
management  as  trustee  for  the  benefit  of  the  persons  men- 
tioned in  the  conveyance  from  M.  A.  T.  Connally  to  her  father, 
C.  P.  Connally,  and  charged  the  goods  when  sold  to  Connally 
&  Company,  the  defendant  was  nevertheless  personally  liable 
to  the  plaintiffs  for  the  price  of  the  goods,  and  it  was  not  nec- 
essary first  to  establish  the  account  as  a  debt  against  the  trust 
estate.  This  rule  is  not  only  in  accordance  with  the  authorities, 
but  is  a  salutary  rule  in  the  interest  of  common  justice.  Since 
the  trustee  was  personally  liable,  it  v/as  not  necessary  that  the 
beneficiaries  should  be  made  parties  to  the  suit.  The  account 
sued  on  was  not  barred  by  limitation  when  plaintiff's  first 
amended  original  petition  was  filed,  so  it  is  necessary  to  inquire 
whether  or  not  the  amended  petition  set  up  a  new  cause  of 
action.     It  appears  from  the  petition  that  the  account  was  not 

46  Taylor  v.  Davis'  Adm'x.,  110       (Mass.),  24  N.  E.  202  and  Asso- 


U.  S.  330,  4  Sup.  Ct.  Rep.  147 
Hewitt  V.  Plielps,  105  U.  S.  400 
Sanford  v.  Howard,  29  Ala.  684 


ciation  v.  McAllister  (Mass.), 
26  N.  E.  862.  Tlie  Alabama  case 
is    where    a   guardian    was    held 


New  V.  Nicoll,  73  N.  Y.  127,  29  liable;    it  is  also  reported  in  68 

Am.  Rep.  111.  Amer.    Dec.    101,    which    see    for 

This    doctrine    is    also    recog-  note  as  to  executors  and  admin- 

nized     in     Mason     v.     Pomeroy  istrators. 


204  Trusts  for  Business  Purposes. 

[CONNAXLY    V.    LYONS.] 

due  for  a  time  after  the  date  of  the  items  from  which  two 
years  would  extend  past  the  fiUng  of  the  amended  petition.  So 
the  demurrer  setting  up  hmitation  was  properly  overruled  by 
the  court.  We  conclude  that  there  was  no  error  in  the  judg- 
ment of  the  court  below,  and  that  the  same  should  be  affirmed. 

Ii8 — For  Mismanagement. 

Where  duties  are  conferred  by  an  express  trust,  its  terms 
must  be  conformed  to  by  the  trustees,  and  for  failure  to  do  so 
they  are  liable  for  any  loss  to  the  shareholders.*^  So  if  trus- 
tees are  guilty  of  mismanagement  or  maladministration,  and 
the  beneficiaries  of  the  trust  are  justified  in  suing  them  to  re- 
cover or  secure  the  trust  estate  in  their  hands,  the  attorney's 
fees  of  the  trustees  for  resisting  such  an  action  will  not  be 
allowed  out  of  the  trust  estate.*'^  It  is  the  duty  of  a  trustee  to 
look  after  trust  property,  and  where  he  causes  the  trust  estate 
to  be  repaired  improperly  and  negligently,  he  is  not  shielded  from 
personal  liability  by  reason  of  his  trusteeship ;  his  negligence  is 
his  individual  misfeasance.*^  An  instrument  creating  a  trust 
may  direct  precisely  that  funds  be  invested  in  certain  bonds  or 
securities ;  if  the  investment  is  made  otherwise,  the  amount  so 
invested  should  be  surcharged  to  the  trustee.*^ 

Where  a  trustee  refuses  to  receive  a  dividend  from  an  in- 
solvent debtor  of  the  trust  estate,  he  will  be  treated  as  if  he 
had  in  fact  received  and  failed  to  invest  the  money. ^°  If  money 
is  deposited  in  the  bank  in  such  a  manner  that  it  is  not  under 

46Klugli    V.     Seminole    Secur-  Div.   387,   168  N.  Y.   Sup.   808. 

ities  Co.,  103  S.  C.  120,  87  S.  E.  « Internatl.      Trust      Co.      v. 

645.  Preston   (Wyo.),  156  Pac.  1128. 

47Melson    v.    Travis,    133    Ga.  60  Backus   v.   Crane,   87   N.   J. 

710,  66  South.  936.  Eq.   229,   100  Atl.   900. 

48  Trani    r.    Gerard,    181    App. 


Liability  of  Trustees.  205 

the  trustee's  own  exclusive  control — ^as  where  money  is  depos- 
ited so  that  it  can  be  drawn  without  the  concurrence  of  another 
person — it  is  at  the  peril  of  the  trustee,  and  he  is  liable  for  any 
loss  occasioned  thereby.^^  For  the  rule  is  that  where  a  loss 
lias  occurred  which  must  fall  upon  one  of  two  persons,  it  must 
be  borne  by  him  whose  act  occasioned  it.^^ 

119 — For  Acts  of  Others. 

The  trustees  of  a  trust  estate  operating-  as  a  business  com- 
pany are  individually  the  masters  of  the  servants  engaged 
therein,  and  may  not  absolve  themselves  of  personal  liability 
for  breach  of  masters'  duty  toward  such  servants. ^^  pQj-  ^vhere 
trustees  appoint  an  agent  to  collect  rents  from  trust  property, 
the  trustees  are  liable  for  collections  made.^*  Just  the  same  as 
the  trustees  are  held  responsible  for  property  intrusted  to  an 
agent  and  he  appropriates  the  property  to  his  own  use.^^  Trus- 
tees are  also  liable  for  their  attorney's  misappropriation  of  the 
trust  funds  where  they  permit  him  to  collect  money  at  various 
times  during  a  period  of  years  without  making  an  effort  to 
recover  any  of  the  sums,  and  retain  the  attorney  after  they 
should  liave  known  of  his  misappropriation  of  the  trust 
funds.^^  The  acceptance  of  a  trusteeship  involves  a  duty,  and 
where  one  of  two  trustees  surrenders  to  his  co-trustee  the  en- 
tire control  of  all  the  personalty  and  expenditures,  and  makes 
no  attempt  to  verify  his  associate's  accounts,  he  is  liable  for 
his  associate's  default;  for  while  as  a  general  rule  a  trustee  is 

61  Boehmer    v.    Silvestone,    95  54  Dillivan  v.  German  Savings 
Ore.  154,  186  Pac.  26.  Bank   (la.),  124  N.  W.  350. 

62  Cochran  v.  Richmond   &  A.  65  Boehmer   v.    Silvestone,   Su- 
R.  Co.,  91  Va.  339,  21  S.  E.  664.  pra. 

63  Fisheries      Co.      v.      McCoy  66  McRoberts       v.        Carmeal 
(Tex.  Civ.  App.),  202  S.  W.  343.  (Ky.),  44  S.  W.  442. 


2o6  Trusts  for  Business  Purposes. 

responsible  only  for  his  own  acts  or  defaults,  yet,  if  by  any 
affirmative  act  or  any  omission  of  duty  he  facilitates  a  breach 
of  trust,  he  is  liable. ^''^  A  trustee  who  permits  his  cotrustee  to 
use  funds  of  the  estate,  giving  his  note  for  the  amount,  is 
accountable  to  the  trust  for  the  amount  so  used.^*  Where  trus- 
tees are  not  diligent  in  the  protection  and  care  of  the  trust  prop- 
erty, they  may  be  liable  for  embezzlement  of  trust  funds  by  a 
third  trustee. ^^ 

1 20 — For  Negligence. 

Where  a  trustee  is  negligent  or  unfaithful,  he  is  responsible 
for  the  amount  the  property  coming  into  his  hands  ought  to 
vield,^®  for  when  trustees  accept  the  office  they  should  bear  in 
mind  that  the  law  knows  no  such  person  as  a  passive  trustee 
and  that  they  cannot  sleep  upon  their  trust.  If  such  trustee 
remains  quiet  for  any  reason  and  suffers  some  other  to  do  all 
the  business,  he  is  as  answerable  for  the  money  as  if  he  load 
conducted  the  business.  If  a  loss  occurs  from  any  want  of 
attention,  care  or  diligence  in  him  after  his  acceptance,  he  may 
be  held  responsible  for  not  taking  such  action  as  was  called 
for.  A  trustee  will  be  held  responsible  for  failure  to  do  that 
which  he  ought  to  do,  as  well  as  for  his  acts  of  positive  mis- 
conduct. He  must  respond  in  damages  for  any  neglect  of  duty, 
express  or  implied.^^  The  rule  is  that  trust  estates  cannot  be 
mulcted  for  personal  injuries  sustained  through  the  negligence 
of  the  trustees  in  relation  thereto.^^     Where  a  trustee  learns 

57  Caldwell  v.  Graham,  115  60  Candelaria  v.  Miera,  18  N. 
Md.  122,  80  Atl.  839.  M.  107,  134  Pac.  829. 

58  In  re  Cozzens'  Estate,  15  N.  61  Holmes  v.  McDonald,  226  111. 
Y.   Sup.  771.  169,  80   N.   E.   714. 

59  In  re  Graham  Estate,  218  62  Xorling  v.  Allee,  10  N.  Y. 
Pa.  357,  67  Atl.  462.  Sup.  97. 


LiABiuTY  OF  Trustees.  207 

of  any  matters  relating  to  mismanagement  or  misapplication  of 
trust  funds  by  his  co-trustee,  his  failure  to  take  steps  to  pre- 
vent the  same  renders  him  liable  for  the  resulting  loss:  also, 
if  through  the  negligence  of  a  trustee,  his  cotrustee  is  permitted 
to  convert  the  trust  funds  to  his  own  use,  the  failure  to  exer- 
cise diligence  renders  him  liable  for  the  loss.*^^  A  trustee  may 
be  negligent  in  seeking  to  restore  trust  property  which  his 
co-trustee  without  his  concurrence,  may  have  sold  and  not  ac- 
counted for  in  full  to  the  estate,  but  this  would  not  deprive  the 
estate  of  its  right  to  receive  the  full  proceeds  of  the  sale.^* 

There  is  no  special  rule  prohibiting  the  investment  of  trust 
funds  in  the  stocks  and  bonds  of  private  corporations,  and  in 
case  of  loss,  the  question  of  liability  depends  upon  whether  the 
trustee  acted  with  fidelity  and  with  the  care  and  diligence  of  a 
prudent  man.^^  ^  trustee  will  not  be  exonerated  from  liability 
for  a  wrongful  diversion  of  the  funds  of  his  trust  where  the 
declaration  of  trust  provides  that  he  should  be  liable  only  for 
the  result  of  his  own  gross  negligence  or  bad  faith,  or  where 
he  is  guilty  of  wilful  or  intentional  breach  of  trust  committed 
by  acting  plainly  beyond  his  powers.^^ 

121 — Por  Misappropriation. 

Where  a  trustee  misappropriates  trust  funds  or  property,  he 
is  liable,  and  the  property  or  funds  so  misappropriated  may  be 
impressed  with  a  preferential  lien  in  favor  of  the  beneficiaries, 
though   the  money  of  the  trust   estate  was  commingled   with 

63  In  re  Adams'  Estate,  221  65  Scoville  v.  Brock,  SI  Vt. 
Pa.  77,  70  Atl.  436.  405,  70  Atl.  1014. 

64  Fritz  V.  City  Trust  Co.,  72  66  Digney  v.  Blanchard,  226 
App.  Div.  532,  76  N.  Y.  Sup.  Mass.  33.5,  115  N.  E.  424;  In  re 
625.  Mallon's    Estate,    110    App.    Div. 

N.  Y.  61,  97  N.  Y.  Sup.  23. 


2o8  Trusts  for  Business  Purposes. 

other  money  of  the  trustee  or  of  his  estate ;  it  is  the  duty  of  the 
substituted  trustee  to  assert  a  preferential  Hen  on  the  general 
assets  of  the  trustees  or  of  his  estate  for  the  benefit  of  the 
beneficiaries.^''  That  a  trustee  reposes  great  confidence  in  his 
co-trustee  does  not  excuse  his  failure  to  protect  the  funds 
against  a  misappropriation  of  them  by  such  co-trustee,  nor  does 
the  illness  of  a  trustee  before  the  default  of  his  co-trustee  ex- 
cuse his  failure  to  guard  the  interests  of  the  beneficiaries  where 
he  had  knowledge  before  his  illness  of  the  acts  of  his  co-trustee 
which  should  have  put  him  on  guard  against  the  subsequent 
misappropriation.^^ 

It  is  no  excuse,  nor  is  it  a  defense  to  a  proceeding  against 
the  trustee  and  his  surety  for  misappropriation  of  the  funds, 
that  the  trustor  was  insane  at  the  time  the  trust  was  created.^^ 
In  addition  to  the  liability  of  trustees  for  misappropriation  of 
trust  funds,  third  parties  may  be  held  liable  where  it  is  shown 
that  the  third  party  knowingly  participated  in  the  breach  of 
trustJO 


122 — Extent  of  Trustees'  Liability. 

If  a  trustee  fails  to  use  ordinary  care  in  making  trust  prop- 
erty produce  income,  he  is  liable  for  the  reasonable  income 
value  thereof ;  where  he  uses  ordinar}^  and  reasonable  care  in 
managing  the  trust  fund,  he  is  only  to  be  charged  with  the 
actual  receipts  less  proper  expenditures.'^     He  is  also  charge- 

67Cottmg    V.    Berry,    50    Colo.  Div.  501,  142  N.  Y.  Sup.  902. 

217,  114  Pac.  641.  70  Perry    v.    German    &    Blae- 

68  In    re    Adams'    Estate,    221  baum,   66  W.   Va.   566,   60   S.   E. 
Pa.  77,  70  Atl.  436.  604;    Swift  v.   Williams,   68   Md. 

69  Wright    V.    Clark,    81    Miss.  236,  11  Atl.  835. 

527,  142  N.  Y.  Sup.  812;   Central  71  Dillivan     v.     German     Sav. 

Trust   Co.   V.   Gaffney,   157   App.      Bank  (la.),  124  N.  W.  350. 


Liability  of  Trustees.  209 

able  with  interest  on  sums  he  may  retain  for  himself  which  he 
should  pay  over  to  the  beneficiaries^''  and  where  a  trustee  fails 
to  pay  over  to  his  successor  as  trustee  all  of  the  trust  fund  re- 
ceived from  his  predecessor,  he  is  liable  on  his  bond  for  the 
deficit  to  his  successor.''^'  The  rule  is  that  all  profits  derived 
from  the  trust  property  become  a  part  of  the  trust,  and  a  trustee 
is  liable  for  secret  profits  even  though  the  transaction  from 
which  they  arise  benefits  his  trusty  the  beneficiary  is  entitled  not 
only  to  a  part,  but  to  all,  of  the  benefits.'*  Where  a  trustee  is 
negligent  in  selling  stock  and  there  is  a  loss,  he  should  be  sur- 
charged with  the  difference  between  the  market  value  of  the 
stock  at  the  time  he  should  have  sold  it,  and  the  lower  price  at 
which  it  subsequently  sold.'''^  Where  two  trustees  have  been 
guilty  of  a  breach  of  trust,  the  court  may  determine  the  order 
in  which  they  shall  stand  answerable  for  the  loss  by  making 
one  primarily  liable,  and  the  other  secondarily  -^^  or  the  loss 
may  be  divided  between  the  trustees  guilty  of  neglect  or  breach 
of  trust.''^ 

123 — Limitation  of  Trustees'  Liability. 

Where  the  trustees'  liability  is  sought  to  be  limited  to  the 
trust  property,  the  trust  instrument  should  especially  provide 
against  personal  liability ;  this  provision  of  limited  lia'bility 
should  be  embodied  in  all  contracts  and  instruments,  and  in  all 
dealings  with  third  parties  by  the  trustees^^    Under  certain  cir- 

72  In  re  Bosler's  Estate,  161  76  McCartin  v.  Administrator 
Pa.  457,  29  Atl.  57.                                of  Traphagen,  43  N.  J.  Eq.  323, 

73  Bogard  v.  Planters'  Banlt  &      11  Atl.  156. 

Trust  Co.   (Ky.),  112  S.  W.  872.  77  Fisheries      Co.      v.      McCoy 

74KeeIy  v.  Black,  90  N.  J.  Eq.  (Tex.  Civ.  App.),  202  S.  W.  343. 

439,  107  Atl.  825.  78  Hussey  v.  Arnold,  185  Mass. 

76  Babbit  v.  Fidelity  Trust  Co.,  202,  70  N.  E.  87. 

72  N.  J.  Eq.  745,  66  Atl.  1076. 


2IO  Trusts  for  Business  Purposes. 

cumstances,  trustees  and  members  of  an  incorporated  associa- 
tion may  limit  their  liability  as  to  some  torts ;  and  in  special 
instances  even  relieve  the  trust  estate,  since  it  is  not  contrary 
to  public  policy  to  stipulate  against  liability  for  negligence  ex- 
cept where  relation  of  master  and  servant  or  passenger  and 
carrier  exists.'''^ 

The  principle  of  law  under  which  trustees  limit  their  liability 
is  thoroughly  discussed  in  the  case  of  Shoe  and  Leather  Na- 
tional Bank  v.  Dix.^®  There  the  trustees  as  such,  signed  a 
note;  they  expressly  stipulated  against  personal  liability.  In  a 
suit  to  subject  them  personally  to  the  amount  of  the  note,  the 
court  held  that  inasmuch  as  they  had  limited  their  liability,  Jt 
was  not  within  the  power  of  the  court  to  change  the  trust  lia- 
bility to  a  personal  one.  This  is  one  of  the  leading  cases  on 
the  subject  of  limited  liability.  The  note  in  question  was  set 
out  in  this  language: 

February  i6,  1871.  $53,000.  For  value  received,  we  as 
trustees,  but  not  individually,  promise  to  pay  to  the  Boston 
Water  Power  Company  or  order,  the  sum  of  fifty-three  thou- 
sand dollars  in  five  years  from  this  date,  with  interest  to  be  paid 
semi-annually  at  the  rate  of  seven  per  centum  per  annum  during 
said  term,  and  for  such  further  time  as  said  principal  sum  or 
any  part  thereof  shall  remain  unpaid. 

Signed  in  Presence  of  P.  H.  Sears. 

Geo.  P.  Sanger, 
Joseph  Dix, 
R.  A.  Ballou, 

Trustees. 
This  note  was  secured  by  a  mortgage  of  real  estate  in  Boston; 

79  Fisheries  Co.  v.  McCoy,  Su-  80  123  Mass.  148,  25  Am.  Rep. 

pra.  49. 


Liability  of  Trustees.  211 

[SHOE   &   LEATHER   NATL.   BANK   v.   DIX] 

the  proceedings  and  findings  of  the  court  are  substantially  as 
follows : 

On  February  16,  187 1,  the  association,  through  its  said  trus- 
tees, caused  a  purchase  of  property  from  the  Boston  Water 
Power  Company  to  be  effected  and  the  conveyance  to  be  made 
to  the  defendants,  "as  they  are  trustees  for  the  Brookline  Av- 
enue Associates  as  hereinafter  set  forth."  "To  have  and  to 
hold  the  granted  premises,  with  all  the  privileges,  easements 
and  appurtenances  thereto  belonging,  to  the  said  Sanger,  Dix 
and  Ballou,  as  joint  tenants  and  not  as  tenants  in  common,  and 
to  their  heirs  and  assigns  and  to  the  survivor  of  them  and  his 
heirs  and  assigns  forever,  in  trust  nevertheless  for  the  Brook- 
line  Avenue  Associates  for  the  following  purposes :  to  take 
hold,  mortgage,  lease,  manage  and  improve  the  same  according 
to  the  exercise  of  their  best  discretion,  with  full  power  in  the 
trustees  or  trustee  for  the  time  being  in  the  exercise  of  such 
discretion,  to  sell  at  public  or  private  sale  any  portion  or  the 
whole  of  the  real  estate  hereby  conveyed,  and  to  make,  execute 
and  deliver  good  and  sufficient  deeds  to  convey  the  same  in  fee 
simple  free  from  the  trusts  hereby  created." 

At  the  same  time  with  the  execution  and  delivery  of  the  deed, 
a  mortgage  back  to  the  Boston  Water  Power '  Company  in  part 
payment  of  the  purchase  money  was  executed  by  the  defend- 
ants, and  the  note  secured  thereby — being  the  note  in  question — 
given,  which  was  indorsed  to  the  plaintiff.  The  mortgage  was 
never  assigned  to  the  plaintiff,  having  been  foreclosed  by  sale 
on  November  4,  1875. 

If,  upon  these  facts,  the  defendants  were  liable,  they  were 
to  be  defaulted,  judgment  to  be  ordered  against  the  defendant 
Dix  for  a  sum  stated,  to  be  proved  against  his  estate  in  bank- 
ruptcy, but  no  execution  to  issue  against  him  personally  and 
against  the  defendant  Sanger;  otherwise,  judgment  was  to  be 


212  Trusts  for  Business  Purposes. 

[SHOE   &   LEATHER   NATL.   BANK   v.   DIX] 

ordered  for  the  defendants.  The  court,  in  passing  on  the  facts 
above,  said  tliat  the  question  whether  the  defendants  have  made 
themseh'es  personally  responsible  must  be  determined  by  the 
terms  of  the  note  itself.  In  determining  the  proper  interpreta- 
tion of  any  written  contract,  the  court  will  give  full  effect  to 
all  the  terms  in  which  it  is  expressed.  Those  terms  will  not 
be  modified  by  extrinsic  evidence  tending  to  show  that  the  real 
intention  of  the  parties  was  something  different  from  what  the 
language  imports.  They  will  be  taken  in  their  plain,  ordinary 
and  popular  sense,  except  where  it  may  be  qualified  by  some 
special  usage,  or  where  the  context  evidently  shows  that  the 
parties  in  some  particular  case  had  a  dift'erent  intent.  It  is  no 
part  of  the  business  of  the  court  to  make  or  alter  a  contract  for 
the  parties.  Even  if  it  be  found  that  the  contract  according  to 
its  true  meaning,  has  no  legal  validity  or  fails  to  becomxe  opera- 
tive, it  is  not  for  the  court,  in  order  to  give  it  operation,  to  sup- 
pose a  meaning  which  the  parties  have  not  expressed,  and  which 
it  is  certain  they  did  not  entertain.  It  must  be  assumed  that  all 
the  language  used  in  the  contract  was  selected  with  some  pur- 
pose and  is  to  be  of  some  effect.  If  a  party,  therefore,  in  a 
contract  into  which  he  voluntarily  enters,  and  not  in  the  execu- 
tion of  any  official  trust  or  duty,  makes  it  an  express  stipulation 
that  he  is  acting  for  somebody  else,  and  is  in  no  event  to  be 
personally  liable,  he  certainly  cannot  be  rendered  so  by  law.^^ 
In  a  question  as  to  the  meaning  of  a  contract,  the  want  of  apt 
words  to  create  a  personal  responsibility  is  not  to  be  supplied 
by  the  alteration  or  enlargement  of  its  terms. 

In  applying  these  familiar  and  elementary  rules  of  construc- 
tion to  the  case  now  before  us,  we  find  that  the  defendants 
promised  "as  trustees  but  not  individually."    The  construction 

81  Sedgwick,  J.,  in   Sumner  v.     Williams,   8  Mass.   162,   184. 


Liability  of  Trustees,  213 

rSHOE   &   LEATHER   NATL.   BANK   v.    DIXl 

contended  for  by  the  plaintiffs  would  require  us  to  strike  out 
the  words  "but  not  individually ;"  although  in  so  doing  we 
should  not  only  alter  the  contract,  but  should  impose  upon 
them  a  liability  which  apparently  they  took  special  pains  to 
avoid. 

It  is  to  be  borne  in  mind  that  this  was  not  a  case  of  agents 
acting  for  an  undisclosed  or  unknown  principal,  and  is,  there- 
fore, readily  distinguishable  from  Winsor  v.  Griggs,^^  and 
cases  of  that  class.  Neither  was  it  an  attempt  by  the  defend- 
ants to  bind  property  over  which  they  had  no  legal  control. 
By  the  terms  of  the  deed  they  had  power  to  mortgage,  lease 
and  manage  the  property  at  their  discretion,  but  for  the  benefit 
and  on  the  account  of  the  equitable  owners,  namely,  the  mem- 
bers of  the  Brookline  Avenue  Association.  In  this  respect  the 
case  differs  from  Thacher  v.  Dinsmore,^^  and  other  cases  of 
that  class,  in  which  a  party  promising  "as  guardian,"  etc.,  was 
held  to  have  made  himself  personally  liable. 

Neither  can  it  be  said  that  the  term  "trustees"  was  used  as  a 
mere  description  of  the  general  relation  or  office  which  the 
person  signinp-  the  paper  holds  to  another  person  or  to  a  cor- 
poration, without  indicating  that  the  particular  signature  is 
made  in  the  execution  of  the  office  and  agency.  In  this  respect 
the  case  differs  from  Tucker  Manuf.  Co.  v.  Fairbanks.^*  It 
often  has  happened  that  an  agent  for  another  person,  or  the 
treasurer  of  a  corporation,  has  made  himself  personally  respon- 
sible by  the  form  of  words  in  which  he  has  expressed  himself 
in  a  written  contract,  when  he  may  have  intended  to  bind  his 
principal  only.  Cases  in  which  this  question  has  been  raised 
have  often  been  before  this  and  other  courts,  and  the  authori- 
ties have  recently  been  collected  and  reviewed  in  several  of  our 

82  5  Cush.  210.  V.  Fuller,  6  Mass.  58. 

83  5    Mass.   299.     Also   Forster  84  98  Mass.  101. 


214  Trusts  for  Business  Purposes. 

[SHOE    &   LEATHER   NATL.   BANK  v.  DIX.] 

own  decisions. ^^  But  we  believe  no  case  can  be  found  in  which 
a  promise  "as  trustee,"  etc.,  accompanied  with  an  express  dis- 
claimer of  personal  liability,  would  fail  to  exempt  him. 

It  is  contended  that  if  these  defendants  are  not  liable  upon 
the  contract  as  a  note,  then  nobody  is  liable.  Even  if  such  were 
the  fact,  it  would  not  be  in  the  power  of  the  court,  as  we  have 
already  seen,  to  alter  the  contract  for  the  purpose  of  giving  it 
validity.  In  deciding  whether  the  defendants  have  or  have  not 
bound  themselves,  we  need  not  decide  whether  they  have  or 
have  not  bound  their  principals.*^  But,  even  if  the  written  con- 
tract should  fail  of  taking  effect  as  a  negotiable  note,  it  might 
still  be  operative  as  an  acknowledgment  of  unpaid  debt  which 
the  mortgage  was  intended  to  secure.  It  may  be  that  this  was 
all  that  the  original  parties  intended,  or  supposed  to  be  material. 
They  may  have  considered  the  mortgage  sufficient  security 
without  the  personal  responsibility  of  the  trustees. 

Our  conclusion,  therefore,  is  that,  without  proof  that  the  de- 
fendants, as  trustees,  liave  funds  of  the  association  in  their 
hands  applicable  to  this  debt,  no  action  can  be  maintained 
against  them.  No  evidence  to  that  effect  having  been  offered, 
we  must  order  judgment  for  the  defendants. 

1 24 — Non-Liability. 

If  a  trustee  contracting  for  the  benefit  of  a  trust  wants  to 
protect  himself  from  individual  liability  on  a  contract,  he  must 
stipulate  that  he  is  not  to  be  responsible  personally,  and  that 
the  other  party  is  to  look  solely  to  the  trust  estate.*'  Trustees 
cannot  be  held  personally  liable  on  a  contract  expressly  restrict- 
ing liability  to  the  trust  fund,  which  it  was  within  their  au- 

85  Slawson  v.   Loring,  5   Allen  98  Mass.  101. 

340;    Barlow    v.    Lee    Congrega-  86  Abbey  v.  Chase,  6  Cush.  54. 

tional     Society,     8     Allen     460;  87  Taylor  v.   Davis,   110   U.    S. 

Tucker  Manuf.  Co.  v.  Fairbanks,  335,  4  Sup.  Ct.  147,  28  L.  Ed.  163. 


Liability  of  Trustees.  215 

thority  to  make,  because  they  failed  properly  to  execute  the 
contract  ;^^  nor  is  a  minority  trustee  personally  liable  on  a  con- 
tract which  he  did  not  personally  make,  merely  because  a  ma- 
jority of  the  trustees  authorized  it.^^  A  trustee  should  not  be 
surcharged  for  a  loss  arising  from  a  mere  error  of  judgment 
when  not  guilty  of  any  willful  neglect  or  fraud.^°  A  trustee 
will  not  be  liable  for  tax  penalties  which  accrue  against  the  trust 
estate  while  he  is  endeavoring  in  good  faith  to  protect  it  from 
liability  for  the  taxes  ;^i  and  a  claim  for  expenses  incurred  in 
making  an  examination  of  the  affairs  of  a  trustee  after  it  is 
discovered  that  he  has  defaulted,  is  not  a  charge  for  which  the 
trustee's  surety  should  be  made  to  answer.^^  Noj-  should  a 
trustee  be  held  accountable  for  money  of  the  estate  appropri- 
ated by  a  cotrustee  to  his  own  use,  without  the  former's 
knowledge.^^ 

Trustees  are  not  responsible  for  the  acts  of  a  deceased  trus- 
tee unless  they  have  expressly  agreed  to  be  responsible;  e.  g.,  if 
a  bond  for  faithful  performance  is  to  be  considered  such  an 
agreement,  their  liability  must  be  fixed  at  least  by  suit  on  the 
bond,  and  not  by  suit  on  purely  equitable  grounds.^*  Nor  are 
the  trustees  liable  for  the  proceeds  of  sales  which  come  directly 
into  the  cotrustees'  hands  without  coming  into  their  possession 
or  control,  nor  for  rents  of  portions  of  the  lands  collected  by 
their  agent  and  by  him  paid  over  without  their  direction  or 
knowledge  to  the  cotrustee  by  whom  they  were  converted.^^ 

88  Rand  V.  Farquhar,  226  Mass.  92  U.  S.  Fid.  &  Guar.  Co.  v. 
91,  115  N.  E.  286.                                  Douglas'    Trustee,    134    Ky.    374, 

89  Markel    v.    Peck,    168    Mo.      120  S.  W.  328. 

App.  358,  151  S.  W.  772.  93  lu    re    Cozzens'    Estate,    15 

90  Appeal    of    Bailey    (Pa.),    5      N.  Y.  Sup.  771. 

Atl.  49.  8*  Laurel  Co.  Ct.  v.  Trustees  of 

91  Denvir  v.  Park,  169  Mo.  Laurel  Co.  Seminary,  93  Ky.  379, 
App.  335,  152  S.  W.  604.  20  S.  W.  258. 


CHAPTER  XII. 
COMPENSATION  OF  TRUSTEES. 

125 — Fixed  by  Instrument. 

Where  compensation  of  a  trustee  is  fixed  by  the  deed  of  trust, 
the  trust  being  of  great  magnitude,  he  will  not  be  required  to 
furnish  free  a  place  in  which  to  give  his  attention  to  the  busi- 
ness, where  his  clerk  can  work  and  where  the  mass  of  books 
and  papers  belonging  to  the  trust  estate  can  be  kept.^^  A  sub- 
stituted trustee,  with  all  the  powers  and  duties  of  the  original 
trustee,  is  entitled  to  the  same  compensation  as  the  original 
trustee,  as  provided  for  in  the  declaration  of  trust.  A  trust 
instrument  may  provide  that  each  trustee  receive  a  stipulated 
compensation  per  month  for  a  period,  of  years — the  duration  of 
the  trust;  their  right  to  such  compensation  is  limited  to  the 
specified  period  and  for  any  further  services  by  reason  of  the 
trust  being  prolonged,  their  compensation  must  rest  upon  an 
award  of  the  court  on  quantum  meruit.^'  Where  a  trust  is  to 
continue  for  a  certain  number  of  years — when  distribution  is 
to  take  place — and  it  directs  that  the  managing  trustee  shall 
receive  a  specified  amount  annually  for  his  services,  the  pro- 
vision for  such  trustee  will  last  only  the  duration  of  the  trust ; 
after  such  period,  the  managing  trustee  is  entitled  to  reasonable 
compensation  to  be  fixed  by  the  court.^^  The  general  rule  is 
that  a  trustee  is  entitled  to  have  his  commission  paid  out  of  the 

95  Purdy  V.  Lynch,  145  N.  Y.  97  In  re  Hanson's  Estate,  159 
462,  40  N.  E.   232.  Cal.  401,  114  Pac.  810. 

96  Southern  Ry.  Co.  v.  Glenn's  98  Muhlke  v.  Tiedemann,  280 
Adm'r.,  98  Va.  309,  36  S.  E.  395.  111.  534,  117  N.  E.  708. 

(216) 


Compensation  op  Trustees.  217 

principal  of  the  trust  fund  where  there  have  been  no  earnings, 
but  where  there  are  earnings  the  cost  of  managing  and  pre- 
serving the  trust  estate  should  be  paid  first  out  of  the  income.®^ 

126 — Reasonable. 

Where  the  trust  instrument  does  not  provide  for  compensa- 
tion, it  is  a  general  principle  in  the  administration  of  trusts  that 
the  trustee  shall  have  reasonable  compensation. 1^°  Where  the 
instrument  creating  a  trust  does  not  declare  that  the  trustee 
shall  be  compensated  for  the  services  rendered  in  executing  the 
trust,  the  court  may  allow  him  a  reasonable  compensation  there- 
for.^ A  trustee  may  find  it  necessary  to  employ  brokers  to  sell 
real  estate  and  distribute  the  proceeds,  and  if  the  sum  paid  out 
by  him  is  reasonable  compensation  he  should  be  allowed  there- 
for.2  A  trustee  may  be  allowed  reasonable  compensation  for 
ordinary  services  rendered  in  the  discharge  of  the  trust ;  semble, 
he  may  be  allowed  extra  compensation  for  extraordinary  serv- 
ices required  of  him  in  the  discharge  of  such  trust.^  Where  a 
trustee  through  error  of  judgment  in  an  honest  endeavor  to 
protect  the  estate  from  a  charge  for  taxes,  permits  the  taxes  to 
lapse  and  penalties  to  accrue,  he  does  not  thereby  forfeit  his 
right  to  compensation  as  trustee.* 


99  Whittingham      v.       Schoen-  2  Rutherford    v.    Ott,    37    Cal. 

field's   Trustee    (Ky.),   68   S.  W.  App.  47,  173  Pac.  490. 

116;    Catt  V.  Wm.  Knabe  &  Co.  3  TurnbuU     v.     Pomeroy,     140 

Mfg.    Co.,    93    Va.    736,    26    S.   E.  Mass.  117,  6  N.  E.  15;  Jarrett  v. 

246.  Johnson,   216    111.   212,   74   N.   E. 

lOOHanscom  v.  Maiden  &  Mel-  756;     Thomas     v.     Thomas,     97 

rose  Gas  Lt.  Co.,  234  Mass.  379,  Miss.  697,  53  So.  630. 

125  N.  E.  626.  4  Denvir  v.  Park,  169  Mo.  App. 

1  Patrick   v.    Patrick,    135    Ky.  335,  152  S.  W.  604. 
307,  122  S.  W.  159. 


2i8  Trusts  for  Business  Purposes. 

127 — Excessive. 

While  trustees  are  allowed  reasonable  compensation  for 
services  rendered,  the  question  of  excessive  compensation  is 
governed  entirely  by  the  kind  and  character  of  services  rendered 
in  behalf  of  the  shareholder  and  the  trust  property.  A  certain 
compensation  may  be  allowed  the  trustees  for  the  duration  of 
the  trust  whose  funds  are  well  invested  wherein  no  vexatious 
questions  are  involved  in  its  administration ;  this  cannot  be  said 
to  be  inadequate  if  a  deceased  trustee,  during  his  lifetime,  re- 
ceived such  compensation  without  suggestion  of  dissatisfac- 
tion.^ A  fee  for  serv^ices  as  trustee  may  be  found  excessive 
if  it  appears  that  his  accounting,  though  involving  large  sums, 
is  comparatively  short  and  simple.^  Where  trustees  contract 
to  render  their  services  for  a  certain  sum,  an  extra  allowance 
may  be  deemed  improper  if  the  services  so  rendered  do  not  in- 
volve more  time  than  was  originally  contemplated  and  there  is 
no  great  responsibility  requiring  extraordinary  compensation;"^ 
but  where  trustees,  in  carrying  out  the  trust,  perform  services 
not  contemplated  originally,  they  may  receive  extra  compensa- 
tion; if  this  extra  is  found  excessive,  it  should  be  reduced.^ 

128 — Commission  to  Trustees. 

Where  no  other  provision  has  been  made  for  the  payment  of 
the  trustees'  services,  they  may  be  paid  a  commission  on  the 
amount  of  business  transacted ;  or  compensation  may  be  paid 
on  a  reasonable  per  cent,  using  the  total  amount  of  the  trust 
property  as  a  basis ;  or  the  trustees'  commission  may  be  based 

6  Kilpatrick  v.  Robert,  278  Mo.  7  Easton   v.   Houston   &   T.   C. 

257,  212  S.  W.  884.  Ry.  Co.,  40  Fed.  189. 

6  Marks    v.    Sample,    111    Ala.  8  Rackemann  v.  Tilton,  236  111. 

637,  20  So.  791.  49,  86  N.  E.  168. 


Compensation  of  Trustees.  219 

upon  a  percentage  of  the  income ;  but  compensation  for  services 
performed  and  liability  incurred  should  be  only  fair,  for  that 
is  all  that  the  trustees  are  entitled  to.^  The  general  rule  seems 
to  be  that  an  allowance  of  five  per  cent  commission  on  the  in- 
come of  the  trust  estate  is  not  excessive  where  the  wisdom  of 
the  trustee's  conversion  of  the  securities  is  not  questioned,  his 
re-investments  are  sound  and  made  without  unreasonable  de- 
lay, and  he  promptly  collects  the  interest.^®  Where  no  extra- 
ordinary ser\'ices  are  rendered  by  a  trustee,  he  will  not  be 
entitled  to  any  compensation  in  excess  of  the  regular  commis- 
sion." However,  allowance  may  be  made  to  a  trustee  for  extra 
and  special  services  for  which  the  rule  seems  to  be  based  and 
apportioned  according  to  the  nature  and  responsibility  of  the 
trust,  and  the  length,  fidelity,  and  success  of  the  service." 

129 — Allowed  by  Court. 

The  chancery  court,  in  appointing  a  proper  trustee,  may 
award  fairly  adequate  compensation,  notwithstanding  the  pro- 
visions of  the  trust  instrument  ;i3  and  where  a  trustee  is  entitled 
to  commission  and  anything  in  addition  is  demanded,  it  must 
be  allowed  by  the  court.i*  Where  trustees  in  their  first  ac- 
count credit  themselves  with  compensation  for  a  certain  period 
and  it  is  allowed  by  the  court,  such  allowance  is  usually  con- 
clusive.i^     Courts  of  chancery,  in  the  exercise  of  their  discre- 

9  Kilpatrick  v.  Robert,  278  Mo.  Riper's  Estate,  90  N.  J.  Eq.  217, 
257,  212   S.   W.  884.  107  Atl.  55. 

10  In  re  Bosler's  Estate,  161  13  In  re  Battin,  89  N.  J.  Eq. 
Pa.    457,    29    Atl.    57;    Wilder   v.      144,  104  Atl.  434. 

Hast  (Ky.),  96  S.  W.  1106.  14  Sartor  v.  Newberry  Land  & 

11  Doom  V.  Howard  (Ky.),  64  Security  Co.,  104  S.  C.  184,  88 
S.  W.  469.  S.   E.  467. 

12  0ffutt  V.  Divine's  Ex'r.  15  In  Re  Hanson's  Estate,  159 
(Ky.),  53  S.  W.  816;   In  re  Van  Cal.  401,  114  Pac.  810. 


220  Trusts  for  Business  Purposes. 

tion,  may  make  an  allowance  of  five  per  cent  on  the  income 
and  one  and  one-half  per  cent  on  the  principal  of  the  trust  prop- 
erty for  the  trustee's  compensation.^^ 

130 — Forfeiture  of  Compensation. 

A  trustee  guilty  of  fraud  or  misconduct  in  the  maangement 
of  the  estate  is  not  entitled  to  compensation  ;i''  and  where  trus- 
tees are  guilty  of  a  breach  of  trust,  one  of  them  converting 
trust  property  and  the  other  acquiescing,  all  compensation  may 
be  denied. ^8  A  trustee  who  repudiates  the  trust  and  claims  the 
trust  estate  as  his  own  property,  involving  it  in  litigation;  who 
refuses  to  pay  over  to  the  beneficiary  the  income  from  the 
trust ;  who  files  an  account  only  when  compelled  to  do  so  by 
law,  and  in  such  account  places  many  unjustifiable  charges,  will 
be  allowed  neither  commissions  nor  expenses. ^^  Where  trus- 
tees keep  no  books — successive  corrected  statements  being  re- 
quired— ^and  an  accounting  is  reached  only  by  compulsion,  they 
are  not  entitled  either  to  commissions  or  counsel  fees  f^  for  the 
rule  is  that  trustees  who  have  been  grossly  negligent  in  the  dis- 
charge of  their  duties  and  who  failed  to  keep  an  account,  are 
not  entitled  to  commissions. 21  Commissions  are  a  compensa- 
tion for  faithful  discharge  of  duty ;  when  trustees  violate  their 
duty  and  commingle  money  belonging  to  their  beneficiaries  with 
their  own  and  use  part  or  all  of  it  for  their  own  private  pur- 
poses, they  are  not  entitled  to  commissions.^'* 

16  Central   Trust   Co.   v.   John-  19  Hanna  v.  Clark,  204  Pa.  145, 
son   (Ky.),  74  S.  W.  663.  53  Atl.  757. 

17  Comingor       v.       Louisville  20  In    re    Reich's    Estate,    230 
Trust  Co.,  128  Ky.  697,  108  S.  W.  Pa.  55,  79  Atl.  151. 

950.  21  Ward  v.  Shire    (Ky.),  65  S. 

18  Harvey  v.  Schwettman  (Mo.      W.  8. 

App.),  180  S.  W.  413.  22Hoboken   Trust   Co.  v.   Nor- 

ton, 90  N.  J.  Eq.  314,  107  Atl.  67. 


Compensation  of  Trustee;s.  221 

131 — Reimbursement  of  Trustees. 

Where  a  trustee  uses  his  own  money  for  the  purposes  of  the 
trust,  he  is  entitled  to  reimbursement  f^  and  this  reimburse- 
ment may  be  made  out  of  money  in  his  hands  which  belongs  to 
the  trust.*^*  Where  a  trustee,  in  executing  his  trust,  makes  ad- 
vances proper  to  be  made,  he  is  not  only  entitled  to  be  reim- 
bursed, but  also  has  a  lien  on  the  trust  estate  for  repayment 
which  is  prior  to  any  encumbrance  imposed  thereon  by  the 
beneficiary.^^  A  trustee's  right  to  reimbursement  for  reason- 
able expenditures  in  the  employment  of  counsel  in  the  interest 
of  the  estate  rests  upon  the  fact  that  he,  and  not  the  trust  estate, 
is  responsible  to  the  attorney  for  his  fees,  and  not  upon  the 
right  of  the  trustee  to  be  subrogated  to  any  rights  of  the  attor- 
ney against  the  estate.^^  But,  when  a  trustee  brings  adversary 
proceedings  to  take  trust  property  from  the  possession  of  those 
entitled  to  it  in  order  that  he  may  distribute  it  to  those  entitled 
adversely,  and  fails  in  his  purpose,  he  cannot  demand  reim- 
bursement of  his  expenses  from  the  trust  fund,  or  contribution 
from  those  whose  property  he  has  sought  to  misappropriate.^' 

132 — Expenses  of  Trustees  in  General. 

A  trust  fund  must  bear  the  necessary  expenses  of  its  admin- 
istration, and  one  who  conducts  a  litigation  for  the  benefit  of 
such  fund  must  be  protected  in  the  distribution  of  it  for  the 

23  American  Bonding  Co.  v.  564,  122  N.  E.  58;  Jessup  v. 
State,  40  Ind.  App.  559,  82  N.  E.  Smith,  223  N.  Y,  203,  119  N.  E. 
548.  403. 

24  Oellien  v.  Gait,  150  Mo.  App.  26  Denvir  v.  Park,  169  Mo. 
537,  131  S.  W.  158.  App.  335,  152  S.  W.  604. 

25  Turton  v.  Grant,  86  N.  J.  27  Hobbs  v.  McLean,  117  U.  S. 
Eq.  191,  96  All.  993;  Patterson  567;  Sommerset  Ry.  v.  Pierce,  98 
V.    Nortliern   Trust    Co.,    286    III.  Me.  528,  57  Atl. 


222  Trusts  for  Business  Purposes. 

expenses  incurred  by  him  in  the  faithful  performance  of  his 
duty. 28  Where  one  of  many  persons  having  a  common  interest 
in  a  trust  fund,  at  his  own  expense,  takes  proceedings  to  save 
it  from  distribution  and  restore  it  to  the  purposes  of  the  trust, 
he  is  entitled  to  reimbursement,  either  out  of  the  fund  or  by 
proportional  contribution  from  those  who  accept  the  benefits 
of  his  efforts.^  On  the  enforcement  of  a  trust  which  the  trus- 
tee attempts  wrongfully  to  carry  out  or  seeks  to  repudiate,  the 
plaintiff  is  entitled  to  his  costs  and  disbursements  ;3*'  but  where 
a  trustee  brings  on  litigation  in  violation  of  his  duty  as  trustee, 
the  cost  of  the  litigation  should  be  taxed  against  him  person- 
ally.^^ As  one  of  the  duties  of  their  office,  the  trustees  are  to 
render  from  time  to  time  an  accounting ;  when  this  is  done  the 
trust  estate  is  charged  with  the  cost  of  the  accounting ;  but  when 
the  trustees  fail  to  account,  and  expenses  are  incurred  by  rea- 
son of  their  failure,  then  they  may  be  compelled  to  pay  the  costs 
personally. ^2 

133 — Attorney's  Fees. 

A  trustee  is  entitled  to  have  his  proper  and  necessary  ex- 
penses incurred  in  the  execution  of  his  trust,  out  of  the  trust 
fund ;  attorney's  fees  are  proper  expenses  whenever  it  is  needed 
to  employ  one  in  the  management,  care,  or  protection  of  the 


28  Las  Vegas  Ry.  &  Power  Co.  Hobbs  v.  McLean,  Supra. 

V.    Trust    Co.    of    St.    L.    Co.,    17  30  Royal  v.  Royal,  30  Ore.  448, 

N.  M.  286,  126   Pac.  1009;    Som-  47  Pac.  828. 

merset    Ry.    v.    Pierce,    Supra;  31  Wiegand    v.    Woerner,    155 

Hobbs  V.  McLean,  Supra.  Mo.  App.  227,  134  S.  W.  596. 

29  Las  Vegas  Ry.  Co.  v.  Trust  32  McCloskey  v.  Bowden,  82  N. 
Co.    of   St.   L.   Co.,    Supra;    Som-  J.  Eq.   410,  89  Atl.   528. 
merset    Ry.    v.    Pierce,    Supra; 


Compensation  of  Trustees. 


223 


trust  estate.3'  Trustees,  who  in  good  faith  engage  counsel  to 
aid  in  the  execution  of  their  trust,  are  entitled  to  pay  them  out 
of  the  trust  fund,^*  and  they  may  also  be  reimbursed  from  the 
trust  for  expenses  incurred  in  that  behalf.^^  Where  a  trust  by 
its  terms  is  not  to  terminate  until  a  certain  time,  and  proceed- 
ings are  brought  before  that  time  to  terminate  it,  the  trustees 
are  entitled  to  an  allowance  of  attorney's  fees  in  resisting  the 
proceedings.^^  Where  the  creator  of  a  trust  endeavors  to  re- 
pudiate it  by  legal  action,  and  it  becomes  necessary  for  the  trus- 
tee to  employ  counsel  to  protect  same,  the  trustee  is  entitled  to 
have  his  reasonable  counsel  fees,  costs,  and  necessary  expenses 
paid  out  of  the  trust  estate.^''^  Where  a  trustee  employs  an  at- 
torney to  perform  services  beneficial  to  the  trust,  but  is  unable 
to  pay  him,  such  attorney  may  sue  to  charge  the  estate  for  his 


services. 


38 


33  Burney  v.  Atkinson  Tenn. 
Ch.,  54  S.  W.  998;  Berry  v. 
Stigall,  125  Mo.  App.  264,  102 
S.  W.  585;  Fox  v.  Fox,  250  111. 
384,  95  N.  E.  498;  Taylor  v. 
Denny,  118  Md.  124,  84  Atl.  369. 

34  Cochran  v.  Richmond  A.  R. 
Co.,  91  Va.  339,  21  S.  E.  664. 


35  Hummel's    Appeal    (Pa.),    5 
Atl.  669. 

36  In  re  Hanson's  Estate,   159 
Cal.  401,  114  Pac.  810. 

37  Bay   Biscayne   Co.   v.   Baile, 
73  Fla.   1120,   75   So.   860. 

38Jessup  V.   Smith,   223   N.  Y. 
203,  119  N.  E.  403. 


CHAPTER  XIII. 

REMOVAL  OF  TRUSTEES. 

1 34 — Jurisdiction. 

A  court  of  equity  has  inherent  jurisdiction  to  remove  a  trus- 
tee, independent  of  statutory  provisions,  for  the  good  cause 
shown  ;^^  and  in  addition  to  the  court's  powder  to  remove  a 
trustee,  it  may  appoint  another  in  his  stead  whenever  there  ex- 
ists a  state  of  mutual  ill  feeling,  based  on  misconduct  or  grow- 
ing out  of  his  misbehavior,  between  him  and  the  beneficiaries, 
and  where  his  continuance  in  office  would  be  detrimental  to  the 
execution  of  the  trust,  though  there  be  no  dishonesty.*^  But 
once  a  trustee  is  appointed  by  the  court  and  he  qualifies  and  ac- 
cepts the  trust,  such  court  has  no  inherent  power  as  a  court  of 
equity  to  revoke  the  appointment,  remove  the  trustee  and  ap- 
point his  successor,  without  cause  and  without  notice  to  him.*^ 
The  rule,  however,  is  different  when  a  trustee  denies  the  trust 
and  refuses  to  perform  it.  Then  a  court  of  equity  will  appoint 
a  new  trustee  in  his  place  and  the  old  trustee  will  not  be  en- 
titled to  retain  the  property  under  cover  of  having  an  account 
as  trustee,  before  paying  over  the  net  proceeds.*''  Where  trust 
property  is  located  in  a  certain  county  and  the  trust  deed  is 
there  recorded,  the  court  of  that  county  has  jurisdiction  of  a 
suit  to  remove  the  trustee,  no  judgment  being  asked  against  the 
trustee  in  personam.** 

39Maydwell   v.   Maydwell,  135  tate,  125  Mo.  128,  28  S.  W.  443; 

Tenn.  1,  185  S.  W.  712.  Parker  v.   Kelley,   166  Fed.  968. 

40  May  V.  May,  17  Sup.  Ct.  42  Irvine  v.  Dunham,  111  U.  S. 
824;    In  re  Battin,  89  N.  J.  Eq.  327. 

144,  104  Atl.  434.  43  Wheatcraft    v.    Wheatcraft, 

41  Hitch    V.    Stonebraker's    Es-      55  Ind.  App.  283,  102  N.  E.  42. 

(224) 


Removal  of  Trustees.  225 

135 — Removal  of — General. 

In  an  action  for  the  removal  of  a  trustee,  it  is  not  necessary 
that  all  the  parties  signing  the  indenture  of  trust  act  together ; 
if  there  are  grounds  for  the  removal  of  the  trustee,  he  may  be 
removed  at  the  suit  of  one  of  the  signers  of  the  indenture.** 
Where  trustees  have  managed  the  estate  with  strict  fidelity  and 
unusual  ability,  they  will  not  be  discharged  because  of  mere 
strained  relations  between  them  and  the  shareholders  which 
were  probably  due  to  the  latter's  own  misconduct  and  misjudg- 
ment  of  the  trustees  ;*^  nor  will  they  be  removed  for  a  mere 
failure  to  make  reports  ;*^  nor  because  of  difference  of  opinion 
between  them  and  the  shareholders;*'  nor  for  a  discord  exist- 
ing between  them  and  the  shareholders,  unless  it  arose  out  of 
the  misbehavior  of  the  trustees;*^  nor  where  there  is  a  mere 
disagreement  between  the  trustees  and  the  shareholders  that  in 
itself  will  not  justify  the  removal  of  the  trustees  ;*^  for  the  ac- 
cepted doctrine  is  that  justifiable  cause  must  exist  as  grounds 
for  removal. 


136 — For  Breach  of  Trust. 

Trustees  are  fiduciaries,  their  duty  is  to  the  trust  and  for  a 
breach  of  this  duty,  they  may  be  removed.  If  they  are  re- 
moved, as  guilty  of  a  breach  of  trust,  they  cannot  complain  that 
after  their  removal  the  court  appointed  only  one  instead  of  two 

44  Barbour  v.  Weld,  201  Mass.  46  Wilson  v.  Smoot,  186  Ky. 
513,    87    N.    E.    909;     Parker    v.       194,  216  S.  W.  129. 

Kelley,    166   Fed.   968;    Jones   v.  47  in  re  Price'  Estate,  209  Pa. 

Jones,  8  Misc.  Rep.  660,  30  N.  Y.  210,  58  Atl.  280. 

Sup.  177.  48  Starr  v.  Wiley,  89  N.  J.  Eci. 

45  Anderson     v.     Kemper,    116  79,  103  Atl.  865. 

Ky.  339,  76  S.  W.  122.  49  Wylie    v.    Bushnell,   277    111. 

484,  115  N.  E.  618. 


226  Trusts  for  Business  Purposes. 

trustees — ^as  required  by  the  trust  instrument.^*'  In  an  action 
to  remove  trustees  for  breach  of  trust,  a  report  concerning  the 
trust  property  made  by  one  of  the  trustees  is  inadmissible  as 
against  the  other.^^  If  a  non-suit  is  negHgently  permitted  and 
injury  results  to  the  estate,  the  trustees  are  guilty  of  a  breach 
of  trust,  and  should  be  removed.^^  So  is  neglect  by  a  trustee 
to  invest  moneys  in  his  hands  a  breach  of  trust,  and  is  ground 
for  removal.^^  Where  one  of  two  trustees  takes  trust  moneys 
out  of  the  trust  estate  and  treats  it  as  his  own,  keeping  no  sep- 
arate account,  he  is  guilty  of  a  breach  of  trust  and  his  cotrustee 
is  also  guilty  of  a  breach  of  trust  if  he  acquiesces  in  such  con- 
duct; hence  both  might  properly  be  removed.^*  The  rule  is 
that  in  all  cases  the  primary  consideration  is  the  welfare  of  the 
shareholders  and  the  trust  property  as  a  whole,  and  trustees 
will  or  will  not  be  removed,  according  to  the  necessity  for  such 
action,  in  order  to  protect  the  trust  estate.^^ 

137 — For  Neglect  or  Misuse  of  Trust  Property. 

Equity  has  power  to  remove  a  trustee  for  neglect  of  his  duty 
— ^anything  showing  a  lack  of  capacity,  fidelity,  or  honesty — 
but  not  for  any  mere  error  of  judgment  or  mistake  as  to  the 
true  construction  of  the  trust  under  which  he  acts.^^  To  justify 
the  removal  of  a  trustee,  there  must  be  a  clear  necessity  for 
such  action  to  save  the  trust  property,  and  the  misconduct  must 
be  such  as  to  show  want  of  capacity  for  or  fidelity  to  the  trust." 

60  Harvey  V.  Schwettman  (Mo.  54  Harvey  v.  Schwettman,  Su- 
App.),  180  S.  W.  413.  pra. 

61  Belding  v.  Archer,  131  N.  C.  65  Langer  v.  Fargo  Merc.  Co. 
287,  42  S.  E.  800.  (N.  D.),  174  N.  W.  90. 

52  Belding  v.  Archer,  Supra.  56  Williams  v.  Nichol,  47  Ark. 

53Cavender    v.    Cavender,    114       254,  1  S.  W.  243. 
U.  S.  464,  57Wiegand    v.     Woerner,     115 

Mo.  App.  227,  134  S.  W.  596. 


Removai,  op  Trustee;s.  227 

But  if  the  acts  or  omissions  of  a  trustee  show  a  want  of  reason- 
able fidelity  to  his  trust,  a  court  of  equity  will  remove  him;"^^ 
and  so  the  use  of  the  trust  estate  by. the  trustee  for  his  own 
benefit,  or  any  neglect  or  mismanagement  which  impairs  or 
jeopardizes  such  estate,  will  furnish  sufficient  ground  for  re- 
moval.^^  A  trustee  may  be  removed  for  misconduct  in  an  ac- 
tion to  cancel  the  trust,  though  the  trust  be  a  personal  one.^® 
A  proceeding  to  remove  a  trustee  appointed  under  a  written 
instrument  is  a  proceeding  in  personam,  and  not  in  rem.^^  The 
complaint  for  mismanagement  of  an  estate  may  allege  all  of 
the  acts  of  the  trustee  in  connection  therewith  from  the  time 
he  assumed  the  management  of  the  trust  estate.^* 

138 — For  Holding  a  Conflicting  Interest. 

As  a  matter  of  course  a  trustee  may  be  a  shareholder  in  the 
trust  property,  and  if  he  is  also  a  director  of  a  corporation  and 
tries  to  influence  the  trust  to  its  detriment  in  favor  of  the  cor- 
poration, he  may  be  removed,  for  he  occupies  antagonistic  re- 
lations to  the  trust.'^^  wiiere  trustees  loan  a  large  part  of  the 
funds  of  the  trust  to  some  of  their  own  members,  and  are 
about  to  divert  the  trust  property  to  their  personal  advantage 
and  the  detriment  of  the  trust,  it  is  proper  for  the  court  to  re- 
move them  and  appoint  new  trustees  in  their  stead.^*  Where  a 
trust  estate  owns  a  majority  of  the  stock  of  a  corporation  and 
one  of  the  trustees  makes  every  effort  to  derive  personal  ad- 
vantage from  the  trust,  against  the  protest  of  his  cotrustee,  his 

68  Cavender   v.    Cavender,    Su-  62  Williamson     v.     Grider,     97 

pra.  Ark.  588,  135  S.  W.  361. 

59  Wheatcraft    v.    Wheatcraft,  63  Gartside    v.     Gartside,     113 
Supra.  Mo.  348,  20  S.  W.  669. 

60  Barbour  V.  Weld,  Supra.  64  state     v.     Ausmus      (Tenn. 

61  Parker  v.  Kelley,  Supra.  Ch.),  35  S.  W.  1021. 


228  Trusts  for  Busine;ss  Purposes. 

conduct  may  be  considered  a  breach  of  trusty  for  which  he  may 
be  removed. ^^  The  personal  interest  of  a  trustee  coming  di- 
rectly in  conflict  with  his  duty  to  the  trust  justifies  his  removal 
without  reference  to  the  question  of  his  good  faith.^^ 

139 — Death  of  Trustee — Sunuivorship. 

At  common  law  several  trustees  hold  as  joint  tenants ;®''  in 
most  of  the  states,  the  estate  of  joint  tenancy  has  been  abol- 
ished by  legislation  excepting,  however,  as  applicable  to  execu- 
tors and  trustees.  The  rule  seems  to  be  that  trustees  are  ex- 
cepted from  the  provision  of  the  statute  requiring  a  declaration 
in  the  trust  instrument  that  the  estate  is  in  joint  tenancy;  and 
unless  the  deed  of  trust  provides  otherwise,  the  trustees  hold  as 
joint  tenants,  and  upon  the  death  of  one  of  them,  the  title  de- 
volves upon  the  survivor — nothing  passing  to  the  heirs  or  per- 
sonal representatives  of  the  deceased  trustee. ^^  The  above  rule 
is  applicable  only  where  there  is  more  than  one  trustee ;  the  law 
seems  to  be  well  established  in  the  case  of  a  single  trustee,  that 
at  his  death  the  legal  title  of  realty  vests  eo  instanti  in  his  heirs 
and  title  to  all  personal  vests  in  his  personal  representatives 
which  can  be  divested  only  by  their  voluntary  conveyance  or 
by  an  order  of  the  court  in  a  proceeding  to  which  they  are  par- 
ties.^^     Naturally,  the  passing  of  this  title  to  the  heirs  of  per- 


66  Elias  V.  Schweyer,  17  Misc.  S.  W.  367;    Lenvine  v.  Gerardo, 
707,  40  N.  Y.  Sup.  906.  60    N.    Y.    Misc.    261,    112    N.    Y. 

eepyle  v.  Pyle,  137   App.  568,  Sup.   192. 
122  N.  Y.  Sup.  256.  69  Davis  v.  Lusk,  191  111.  620, 

67  R.  C.  L.  1276.  61  N.  E.  483;    Gulick  v.  Bruere, 
68Reichert    v.    M.    &    111.    Coal  42    N.    J.    Eq.    639,    9    Atl.    719; 

Co.,   231   111.    238,    83    N.   E.    166,  Woodruff  v.   Woodruff,   44   N.  J. 

121   Am.    St.   Rep.   307;    Oxley   v.  Eq.  349,  16  Atl.  4,  1  L.  R.  A.  380. 
Butler   County,   121   Mo.   614,   26 


Removai.  of  Trustees.  229 

sonal  representatives  is  subject  to  the  trust.''®  It  is  well  settled 
that  the  author  of  a  trust  has  the  right  to  say  in  what  manner 
a  vacancy  in  the  office  of  trustee  shall  be  filled,  and  where  this 
has  been  done  through  the  deed  creating  the  trust,  the  vacancy 
cannot  be  filled  in  any  other  way,  unless  there  is  a  failure  on 
the  part  of  the  remaining  trustees  to  perform  this  duty,  in 
which  case  a  court  of  chancery  will  interpose.'^ 

70  Lawrence  v.   Lawrence,   181  71  Golder   v.   Bressler,   105   111. 

111.  248,  54  N.  E.  918.  419. 


CHAPTER  XIV. 

TRUSTS  DISTINGUISHED   FROM   OTHER  ORGANIZA- 
TIONS. 

Not  a  Partnership. 

140 — In  General. 

The  language  of  the  declaration  of  trust  is  the  true  guide  in 
determining  whether  a  partnership  or  a  trust  is  created.  In  so 
far  as  possible  in  construing  an  instrument,  the  court  will  take 
into  consideration  the  intention  of  the  parties  and  will  give  ef- 
fect to  their  intention  if  no  fundamental  principles  of  law  have 
been  violated.  The  distinctive  feature  between  a  trust  and  a 
partnership  is  that  of  control  and  power,  i.  e.,  who  controls  the 
trust  estate  and  who  has  the  power  to  contract  and  subject  it 
to  liability.  We  have  the  answer  to  these  two  questions  in  the 
rule  which  determined  whether  a  trust  or  a  partnership  was 
created  in  the  case  of  Connally  v.  Lyons,''^^  wherein  the  court 
said: 

"There  was  no  contract  of  partnership ;  the  trustee  acted  as 
such  under  an  appointment  from  the  court  and  had  the  entire 
control  and  sole  management  of  the  business ;  there  was  no 
right  of  control  whatever  reserved  in  the  instrument  to  the 
beneficiaries  as  such.  A  test  of  partnership  is  the  right  of 
control  over  the  property  or  profits,  or  to  make  disposition 
thereof." 

Where  the  trustees  hold  title  to  all  property  and  are  free 
from  the  will  of  the  beneficiaries,  then  a  trust  is  created ;  but  if 

78  82  Tex.  664,  18  S.  W.  799,  21    A.   St.  Rep.  935. 

(230) 


Trusts  Distinguished  from  Other  Organizations.  231 

the  beneficiaries  have  the  power  to  remove  a  trustee  or  in  any 
way  control  his  action  in  so  far  as  he  is  fulfilling  his  duty  as 
trustee,  then  a  partnership  is  created.  There  are  a  great  num- 
ber of  decisions  in  which  the  question  of  partnership  in  trust 
instruments  is  taken  up ;  two  of  them  may  be  considered  leading 
cases  on  the  subject  of  trusts  distinguished  from  partnerships. 
The  first  one  is  Williams  v.  Inhabitants  of  MiltonJ^  in  which 
the  trust  instrument  and  the  relation  of  shareholders  to  the 
trustees  was  involved ;  the  court  held  that  a  trust  was  created 
and  not  a  partnership.  The  case  is  reported  substantially  as 
follows : 

Taxes  were  assessed  against  the  trustees  of  the  Boston  Per- 
sonal Property  Trust  on  the  theory  that  they  were  partners ; 
they,  as  trustees,  filed  suit  stating  that  they  were  trustees  and 
for  that  reason  they  asked  for  an  abatement  of  the  taxes  as- 
sessed against  them.  The  Boston  taxes  were  assessed  on  the 
theory  that  the  property  held  by  the  plaintiffs  (the  trustees) 
under  that  trust  was  partnership  property  to  be  assessed  tmder 
St.  1909,  c.  490,  pt.  I,  sec.  27,  in  Boston  where  the  partnership 
— if  there  was  a  partnership — had  its  place  of  business.  The 
other  taxes  were  assessed  upon  the  theory  that  the  property 
held  by  the  plaintififs  under  that  trust  was  held  by  them  as 
trust  property,  the  income  of  which  was  payable  to  another 
person  and  was  to  be  assessed  under  St.  1909,  c.  490,  pt.  i, 
sec.  23,  cl.  5. 

It  was  contended  in  effect  if  not  in  terms  that  whatever  was 
its  true  character  the  trust,  for  the  purpose  of  taxation,  was  a 
partnership.  Doubtless,  the  legislature  might  provide  that  a 
trust  which  was  not  a  partnership  should  be  treated  as  a  part- 
nership for  the  purpose  of  taxation;  but  it  has  not  done  so. 

73  215  Mass.  1,  102  N.  E.  355. 


232  Trusts  for  Business  Purposes. 

fWILLJAMS   V.   INHABITANTS   OF  3I1LTON.] 

What  the  legislature  lias  done  is  to  provide  that  "personal  prop- 
erty held  in  trust  by  an  executor,  administrator  or  trustee,  the 
income  of  which  is  payable  to  another  person,  shall  be  assessed 
to  the  executor,  administrator  or  trustee  in  the  city  or  town 
in  which  such  other  person  resides,  if  within  the  common- 
wealth," and  if  he  resides  out  of  the  commonwealth,  in  the 
place  where  the  trustee  resides  (St.  1909,  c.  490,  pt.  i,  sec.  23)  ; 
and  that  "partners,  whether  residing  in  the  same  or  in  different 
cities  or  towns,  may  be  jointly  taxed  under  their  firm  name 
where  their  business  is  carried  on,  for  all  the  personal  property 
employed  in  such  business,  except  ships  or  vessels."  (St.  1909, 
c.  490,  pt.  I,  sec.  27).  That  is  to  say,  the  legislature  has  pro- 
vided that  the  right  to  tax  property  as  trust  or  as  partnership 
property  depends  upon  the  real  cliaracter  of  the  proj^erty  taxed. 
Under  these  enactments  of  the  legislature,  there  is  no  room  for 
holding  that  property  which  is  in  reality  not  partnership  prop- 
erty can  be  taxed  as  partnership  property.  The  right  to  tax 
property  as  trust  or  as  partnership  property  depends  upon  wliat 
the  character  of  the  property  taxed  really  is.  The  court  here 
proceeds  to  a  discussion  of  the  principles  on  which  the  question 
of  the  true  character  of  the  Boston  Personal  Property  Trust  de- 
pends, and  says  that : 

141 — What  Constitutes  Partnership. 

Where  persons  associate  themselves  together  to  carry  on 
business  for  their  mutual  profit,  they  are  none  the  less  partners 
because  (i)  their  shares  in  the  partnership  are  represented  by 
certificates  which  are  transferable  and  transmissible,  and  be- 
cause (2)  as  a  matter  of  convenience  (if  not  of  necessity  in 
case  of  transferable  and  transmissible  certificates)  the  legal  title 
to  the  partnership  property  is  taken  in  the  name  of  a  third 


Trusts  Distinguished  from  Other  Organizations.  233 

person.  The  person  in  whose  name  the  partnership  property 
stands  in  such  a  case  is  perhaps  in  a  sense  a  trustee.  But 
speaking  with  accuracy,  he  is  an  agent  who  for  the  principal's 
convenience  holds  the  legal  title  to  the  principal's  property. 

Several  instances  of  such  partnerships  are  to  be  found  in  our 
reports.  In  Hoadley  v.  County  Com'rs.  of  Essex,'*  one  Gor- 
don McKay  executed  a  declaration  of  trust  by  which  he  de- 
clared that  he  held  his  patents  for  sewing  the  soles  of  boots  and 
shoes  to  the  vamps,  his  factory  where  machines  were  manufac- 
tured under  these  patents  and  the  whole  business  theretofore 
carried  on  by  him  in  trust,  for  such  persons  as  should  buy  cer- 
tificates which  were  to  be  issued  under  that  declaration  of  trust 
to  the  amount  of  50,000  in  number,  the  proceeds  to  be  used 
in  carrying  on  the  factory  and  business  assigned  to  and  held 
by  the  trustee.  The  certificate  holders  were  to  be  known  as  the 
AIcKay  Sewing  Machine  Association  and  the  business  to  be 
conducted  by  an  executive  committee  to  be  chosen  by  them. 
This  was  held  to  create  a  partnership,  and  for  that  reason  the 
shares  were  held  not  to  be  taxable  to  the  holders  of  them;  there 
is  a  subsequent  case  involving  the  same  association,  where  the 
same  conclusion  was  reached.''*  In  Whitman  v.  Porter,''®  cer- 
tain subscribers  associated  themselves  together  to  buy  a  ferry- 
boat to  be  run  between  Agawam  and  Springfield ;  the  boat  was 
to  be  conveyed  to  one  of  the  subscribers  "in  trust"  and  the 
entire  business  was  to  be  conducted  by  these  trustees  and  their 
officers  to  be  annually  elected  by  the  subscribers.  The  stock 
was  assignable.  These  stockholders  were  held  to  be  partners. 
In  Phillips  V.  Blatchford,'''  the  money  to  carry  on  the  business 
of  manufacturing  and  selling  grates  was  raised  by  the  sale  of 

74  105  Mass.  519.  76  107  Mass.  522. 

76Gleason      v.      McKay,      134  77  137   Mass.   510. 

Mass.   419. 


234  Trusts  for  Business  Purposes. 

transferable  certificates  issued  under  a  somewhat  similar  declara- 
ration  of  trust  which  provided  that  the  business  should  be  car- 
ried on  by  a  board  of  managers  of  whom  the  trustee  was  to  be 
one,  and  the  other  members  were  to  be  elected  by  the  share- 
holders. This  also  was  held  to  be  a  partnership.  In  Ricker  v. 
American  Loan  &  Trust  Co.,'^  the  doctrine  of  these  cases  was 
extended  to  a  case  w^here  the  purpose  of  the  association  was  to 
buy  cars  to  be  leased  to  a  specified  railroad.  The  persons  pro- 
viding the  purchase  money  were  to  have  transferable  certifi- 
cates, which  certificates  by  the  terms  of  the  lease  to  the  rail- 
road were  to  be  paid  in  ten  annual  installments  with  six  per 
cent,  interest  until  paid.  The  certificate  holders  were  declared 
in  the  declaration  of  trust  to  be  an  association,  and  all  the 
business  was  to  be  transacted  by  a  board  of  managers  to  be 
elected  by  them.  The  property  of  the  association  was  to  be 
held  by  the  American  Loan  &  Trust  Company,  as  trustee.  This 
also  was  held  to  be  a  partnership.  Williams  v.  Boston,'^  was 
a  similar  case.  The  trust  agreement  in  that  case  provided  that 
the  trust  was  established  "for  the  purchase,  development  and 
disposition  of"  the  former  site  of  the  Museum  of  Fine  Arts 
in  Boston.  The  property  was  to  be  held  by  trustees,  but  the 
shareholders  had  a  right  to  remove  the  trustees,  and  meetings  of 
the  shareholders  were  to  be  held  at  which  the  shareholders 
might  authorize  or  instruct  the  trustees  in  any  manner  and  alter 
or  amend  the  declaration  of  trust,  or  direct  the  trustees  to  end 
the  trust,  sell  the  property  and  distribute  the  proceeds.  The 
original  papers  in  the  case  show  these  to  have  been  the  facts  in 
the  case,  although  they  are  not  stated  in  the  report  of  that  de- 
cision. The  property  of  this  association  was  held  to  be  taxable 
as  partnership  property. 

78  140  Mass.  346,  5  N,  E.  284.  79  208  Mass.  497,  94  N.  E.  808. 


Trusts  Distinguished  from  Othe;r  Organizations.  235 

In  Mayo  v.  Moritz,^°  on  the  other  hand,  it  was  held  that 
certificate  holders  under  the  declaration  of  trust  there  in  ques- 
tion were  not  partners.  In  that  case  an  inventor  transferred  his 
invention  to  trustees,  to  whom  by  the  terms  of  the  trust  inden- 
ture, the  patent  was  to  be  issued  when  it  was  allowed.  The 
trust  indenture  provided  for  the  issue  of  scrip  to  those  who 
should  furnish  to  the  trustees  the  money  necessary  for  the  more 
advantageous  disposition  of  the  invention.  The  trust,  on  which 
the  trustees  were  to  hold  the  invention  and  the  money  produced 
by  the  issue  of  scrip,  was  to  hold,  manage  and  dispose  of  the 
invention  or  any  part  thereof,  or  interest  therein  upon  such 
terms  as  to  them  (the  trustees)  or  a  majority  of  them  should 
seem  best,  the  net  proceeds  to  be  paid  one-half  to  the  inventor 
and  the  other  half  to  the  holders  of  the  scrip  or  certificates. 
The  scrip,  called  in  the  trust  indenture  scrip  or  certificates,  was 
transferable.  Vacancies  in  the  office  of  trustees  were  to  be 
filled  by  the  remaining  trustees.  It  was  held  that  the  scrip 
holders  were  not  partners,  and  in  that  respect  the  case  was 
"unlike  Gleason  v.  McKay,  and  Phillips  v.  Blatchford",  supra. 

142 — Difference  Between  Trust  and  Partnership. 

The  difference  between  Hoadley  v.  County  Commissioners, 
(involving  the  same  indenture  as  that  in  Gleason  v.  McKay, 
Whitman  v.  Porter,  Phillips  v.  Blatchford,  Ricker  v.  American 
Loan  &  Trust  Co.,  and  Williams  v.  Boston),  on  the  one  hand, 
and  Mayo  v.  Moritz,  on  the  other  hand  lies  in  the  fact  that  in 
the  former  cases  the  certificate  holders  are  associated  together 
by  the  terms  of  the  "trust"  and  are  the  principals  whose  in- 
structions are  to  be  obeyed  by  their  agent  who,  for  their  con- 
venience, holds  the  legal  title  to  their  property,  the  property  is 

80  151  Mass.  481,  24  N.  E.  1083. 


236  Trusts  for  Business  Purtoses. 

their  property,  they  are  the  masters ;  wliile  in  iMayo  v.  Moritz, 
on  the  other  hand,  there  is  no  association  between  the  certificate 
holders,  the  property  is  the  property  of  the  trustees  and  the 
trustees  are  the  masters.  All  that  the  certificate  holders  in  this 
latter  case  had  was  a  right  to  have  the  property  managed  by  the 
trustees  for  their  benefit.  They  had  no  right  to  manage  it 
themselves,  nor  to  instruct  the  trustees  how  to  manage  it  for 
them.  As  was  said  by  C.  Allen,  J.,  in  this  same  case:  "Tlie 
scrip  holders  are  cestui s  que  trust,  and  are  entitled  to  their 
share  of  the  avails  of  the  property  when  the  same  is  sold,"  and 
that  is  all  to  which  they  were  entitled.  It  was  further  said  in 
the  case  of  Mayo  v.  IMoritz  that  the  scrip  holders  had  a  com- 
mon interest  in  the  trust  fund  in  the  same  sense  that  the  mem- 
bers of  a  class  of  life  tenants  and  the  members  of  a  class 
of  remaindermen  (among  whom  the  income  of  a  trust  fund 
and  the  corpus  are  to  be  distributed  respectively)  have  a 
common  interest ;  but  there  was  no  association  among 
the  certificate  holders  just  as  there  is  no  association,  although 
a  common  interest,  among  the  life  tenants  or  the  remaindennen 
in  an  ordinary  trust.  Another  decision  in  this  commonwealth 
somewhat  like  Mayo  v.  Moritz  is  Hussey  v.  Arnold.*^ 

There  is  a  case  in  England^^*  in  which  the  distinction  between 
cases  like  Hoadley  v.  County  Commissioners  and  Mayo  v.  Mor- 
itz was  pointed  out  and  established,  and  that  case  is  now  the 
established  law  in  England.  In  this  case  (decided  by  the  Court 
of  Appeals  in  1880)  the  trust  deed  provided  for  the  purchase 
by  trustees  of  shares  in  the  capital  stock  of  eleven  different 
submarine  telegraph  companies.  The  money  was  to  be  fur- 
si  185  Mass.  202,  70  N.  E.  87.  v.  Lathrop,  52  Mich.  106,  17  N. 
See,    also,    in    this    connection,      W.  716. 

Makin  v.  Savings  Institution,  23  81J  Smith  v.  Anderson,   15  Ch. 

Me.  350,  41  Am.  Dec.  389;    Burt      D.  247. 


Trusts  Distinguished  from  Other  Organizations.  237 

nished  by  the  subscribers  to  whom  transferable  certificates  were 
to  be  issued.  The  income  derived  from  the  submarine  shares 
and  the  proceeds  of  any  sales  of  them  were  to  be  applied  by 
the  trustees  (i)  in  paying  6  per  cent,  interest  on  the  trust 
certificates  issued  under  the  trust;  (2)  in  redeeming  these  trust 
certificates  at  $120;  and  finally,  when  (3)  all  the  certificates 
had  been  redeemed,  the  surplus,  if  any,  was  to  be  divided 
among  the  former  certificate  holders.  It  was  held  that  this  was 
a  trust  and  not  a  company,  association,  or  partnership  which 
had  to  be  registered  under  Companies  Act  of  1862  (25  &  2^3 
Vict.  c.  89)  Sec.  4.  That  act  provided  that  "no  company,  asso- 
ciation or  partnership  shall  be  formed  for  the  purpose  of  carry- 
ing on  any  other  business  (that  is  to  say,  any  business  other 
than  banking)  that  has  for  its  object  the  acquisition  of  gain  by 
the  company,  association  or  partnership,  or  by  the  individual 
members  thereof  unless  it  is  registered."  This  conclusion  was 
reached  on  the  ground  that  there  is  a  difiference  between  a  part- 
nership where  money  raised  by  the  issue  of  transferable  cer- 
tificates is  to  be  held  by  so-called  trustees  who  are  really  manag- 
ing agents,  and  a  trust  where  money  raised  by  the  issue  of 
transferable  certificates  is  to  be  held  by  trustees  properly  so 
called,  and  that  the  distinction  between  the  two  is  that  which 
we  have  just  stated  in  detail. 

The  decision  in  Smith  v.  Anderson  is  the  law  of  England  to- 
day, although  by  reason  of  some  special  facts  in  that  case  and 
the  way  in  which  the  question  arose,  doubts  as  to  the  conclu- 
sion reached  in  that  case  have  been  thrown  out  by  two  or  three 

individual  judges.^*^ 

82  For    the    subsequent    cases  agents  who  hold  the  legal  title 

see  Crowther  v.  Thorley,  32  W.  and   trustees   properly   so   called 

R.  330;    In  re  Siddall,  29  Ch.  D.  is  reaffirmed,  see  In  re  Thomas, 

1;   In  re  Jones  (1898),  2  Ch.  83,  14  Q.  B.  D.  379,  383;  In  re  Faure 

91.      For    two    cases    where   the  Electric  Accumulator  Co.,  40  Ch. 

distinction     between     managing  D.   141,  151,  152. 


238  Trusts  for  Business  Purposes. 

143 — Shareholders  not  Associated. 

This  brings  us  to  the  question  of  the  character  of  the  Boston 
Personal  Property  Trust.  It  is  plain  that  it  is  a  trust  and  not 
a  partnership.  By  the  terms  of  the  indenture  of  trust  the  prop- 
erty contributed  by  the  certificate  holders,  or  that  bought  with 
money  contributed  by  them  (the  original  trust  property  could 
be  acquired  in  both  ways  by  the  terms  of  the  indenture  of  trust) 
was  to  be  held  by  the  trustees  in  trust  to  pay  the  income  to  the 
holders  of  the  certificates,  and  on  the  termination  of  the  trust 
the  trust  fund  or  the  proceeds  thereof  were  to  be  divided  among 
them.  The  certificate  holders  are  throughout  called  "cestuis 
que  trustent."  The  certificate  holders,  or  cestui s  que  tmstent, 
are  in  no  way  associated  together,  nor  is  there  any  provision 
in  the  indenture  of  trust  for  any  meeting  to  be  held  by  them. 
The  only  act  which  (under  the  trust  indenture)  they  can  do  is 
to  consent  to  an  alteration  or  amendment  of  the  trust  created 
by  the  indenture  or  to  a  termination  of  it  before  the  time  fixed 
in  the  deed.  But  they  cannot  force  the  trustees  to  make  such 
alteration,  amendment  or  termination.  It  is  for  the  trustees  to 
decide  whether  they  will  do  any  one  of  these  things.  All  that  the 
certificate  holders  can  do  is  to  give  or  withhold  their  consent  to 
the  trustee  taking  such  action.  And  the  giving  or  withholding 
of  consent  by  the  cestui s  que  trust  is  not  to  be  had  in  a  meeting 
but  is  to  be  given  by  them  individually.  As  we  have  said,  no 
meeting  of  the  cestuis  que  trust  for  that  or  any  other  purpose 
is  provided  for  in  the  trust  indenture.  The  trustees  of  the  Bos- 
ton Personal  Property  Trust  have  a  right  to  sell  the  trust  se- 
curities and  reinvest  the  proceeds,  and  also  a  limited  power  to 
borrow  on  the  security  of  the  trust  property.  The  certificate 
holders  have  a  common  interest  in  precisely  the  same  sense  that 
the  mem.bers  of  a  class  of  life  tenants  (among  whom  the  in- 


Trusts  Distinguished  from  Other  Organizations.  239 

come  of  a  trust  fund  is  to  be  distributed)  have  a  common  in- 
terest, but  they  are  not  socii,  and  it  is  the  trustees,  not  the 
certificate  holders,  who  are  the  masters  of  the  trust  propert}'. 
The  sole  right  of  the  cestuis  que  trust  is  to  have  the  property 
administered  in  their  interest  by  the  trustees  who  are  the  mas- 
ters, to  receive  income  while  the  trust  lasts,  and  their  share  of 
the  corpus  when  the  trust  comes  to  an  end. 

It  has  been  urged  by  the  learned  counsel  for  the  city  of 
Boston  that  these  certificate  holders  or  cestuis  que  trustent  are 
in  effect  carrying  on  the  business  of  buying  and  selling  securi- 
ties through  the  trustees  as  managing  agents  or  directors,  and 
he  refers  to  two  facts  which  (he  argues)  bear  him  out  in  that 
contention,  namely:  That  the  trustees  on  April  i,  191 1,  had 
on  hand  undivided  income  to  the  amount  of  $51,516.93,  and  a 
"surplus  capital"  amounting  to  $488,566.35.  By  the  terms  of 
the  trust  the  trustees  are  authorized  to  set  aside  from  time  to 
time  such  portion  of  the  net  income  as  shall  not  be  required 
for  dividends  for  a  "surplus  fund,"  which  surplus  fund  may 
be  subsequently  used  by  them  in  their  discretion  in  payment  of 
dividends.  It  appears  that  the  face  value  of  the  outstanding 
certificates  is  $2,090,500.  The  surplus  fund  of  undivided  in- 
come therefore  amounts  to  about  2><  per  cent,  of  the  corpus 
of  the  fund.  The  surplus  capital  of  $488,566.35  is  about  22K> 
per  cent,  of  the  face  value  of  the  outstanding  certificates.  That 
is  not  an  extraordinary  increase  in  the  value  of  the  corpus  of 
the  trust  fund  during  a  period  of  18  years.  But  this  contention 
brings  out  a  fact  in  addition  to  those  already  referred  to,  which 
shows  that  the  Boston  Personal  Property  Trust  is  not  a  partner- 
ship, but  a  trust,  and  nothing  but  a  trust.  When  persons  en- 
gage as  partners  in  buying  and  selling  stocks,  bonds  and  other 
securities  for  their  mutual  profit,  the  gains  made  by  purchases 
and  sales  are  profits  of  the  partnership,  divisible  as  such  among 


240  Trusts  for  Business  Purposes. 

those  entitled  to  the  profits  of  the  partnership.  In  case  of  a 
trust,  on  the  other  hand,  any  gain  made  by  a  change  of  invest- 
ments is  an  accretion  belonging  to  the  corpus  of  the  trust  fund 
and  belongs  to  those  who  own  the  corpus  of  the  fund.  vSuch 
gains  become  part  of  the  corpus  as  much  as  the  original  money 
contribution  to  the  trust  fund.  On  them  the  certificate  holders 
or  cestuis  que  trustent  are  entitled  to  income  while  the  trust 
lasts,  and  to  their  share  of  them  (because  they  are  included  in 
the  corpus  of  the  trust  fund)  when  the  trust  ends  and  there  is 
a  distribution  of  the  corpus  among  the  cestuis  que  trust.  That 
is  the  way  in  which  the  trustees  of  the  Boston  Personal  Prop- 
erty Trust  have  dealt  with  gains  made  by  changes  of  investment 
of  the  securities  of  that  trust.  That  is  to  say,  the  trustees  have 
treated  gains  from  sales  of  securities  not  as  profits  of  a  partner- 
ship organized  to  buy  and  sell  stock  for  a  profit,  but  as  gains 
on  a  change  made  in  the  vestments  of  a  trust  fund. 

It  was  largely  with  respect  to  the  gains  made  by  sales  of  the 
securities  of  the  trust  that  the  special  circumstances  in  Smith 
V.  Anderson  raised  a  doubt  as  to  that  being  a  trust  for  invest- 
ment and  not  a  "business  that  has  for  its  object  the  acquisition 
of  gain."  It  was  provided  in  the  trust  deed  in  Smith  v.  Ander- 
son that  the  submarine  telegraph  sliares  should  not  be  sold  un- 
less they  brought  a  premium  of  30  per  cent.,  and  that  the  pro- 
ceeds of  such  sales  should  be  used  in  the  same  way  that  the 
annual  income  derived  from  the  submarine  telegraph  shares 
should  be  used,  namely,  in  paying  interest  on  the  trust  certifi- 
cates and  in  retiring  those  certificates  at  $120.00  a  share.  They 
were  issued  originally  at  $90  per  share.  In  that  respect  the 
trust  in  question  in  Smith  v.  Anderson  was  quite  different  from 
the  Boston  Personal  Property  Trust.  There  is  nothing  in  the 
trust  deed  of  the  Boston  Personal  Property  Trust  which  is  in 
any  way  different  from  a  trust  under  a  will  except  tliat  there 


Trusts  Distinguished  from  Other  Organizations.  241 

are  no  limitations  over,  and  the  interests  of  the  cestuis  que 
trust  are  represented  by  transferable  and  transmissible  certifi- 
cates. 

144 — Acts  of  Parties  Decisive  in  Determining  Intention. 

Up  to  this  time  we  have  not  alluded  to  the  declaration  in  the 
indenture  of  trust  here  in  question,  that  it  v^^as  the  intention  of 
the  parties  to  it  to  create  a  trust  and  not  a  partnership.  It  is 
what  the  parties  did  that  is  decisive.  If  there  had  been  doubt  as 
to  what  they  did,  what  they  intended  to  do  would  have  been  a 
matter  entitled  to  some  consideration  in  determining  what  they 
did. 

It  was  stated  in  a  passing  remark  made  by  this  court  :n 
Williams  v.  Johnson,^^  that  in  the  trust  before  the  court  in 
that  case  the  certificate  holders  were  partners  within  the  mean- 
ing of  that  word  in  St.  1909,  c.  490,  pt.  i,  sec.  2y.  While  that 
trust  provided  for  meetings  of  the  shareholders  and  in  that  re- 
spect for  some  association  of  and  among  them,  an  examination 
of  the  original  papers  shows  that  it  was  a  trust  and  not  a  part- 
nership. This  remark  was  in  no  way  essential  to  the  decision 
in  Williams  v.  Johnson. 

In  the  Boston  Personal  Property  Trust  the  property  is  the 
property  of  the  trustees,  to  be  managed  for  the  benefit  of  the 
certificate  holders,  but  to  be  managed  by  the  trustees  and  not 
by  the  certificate  holders.  There  is  no  association  of  or  among 
the  certificate  holders.  The  rights  of  the  certificate  holders  are 
limited  to  each  receiving  his  share  of  the  income  of  the  trust 
investments  during  the  continuance  of  the  trust  and  his  share 
of  the  corpus  of  the  trust  when  the  trust  comes  to  an  end.  It 
is  in  every  respect  an  investment  trust  and  nothing  more. 

83  208  Mass.  544,  552,  95  N.  E.    90. 


242  Trusts  for  Business  Purposes. 

It  follows  ( I )  that  the  property  held  by  the  plaintiff  as  trus- 
tees of  the  Boston  Personal  Property  Trust  was  not  taxable  as 
partnership  property,  and  that  in  the  petition  brought  by  them 
against  the  city  of  Boston  they  are  entitled  to  an  abatement ;  and 
(2)  that  their  property  was  taxable  as  property  held  in  trust, 
the  income  of  which  was  payable  to  another,  and  the  taxes  as- 
sessed by  the  assessors  of  the  city  of  Waltham  and  by  the  as- 
sessors of  the  inhabitants  of  Milton  and  of  Brookline  were 
properly  assessed,  and  that  the  petitions  against  those  munici- 
palities should  be  dismissed. 

145 — Trustees  May  Ask  Instructions  of  Court. 

In  the  second  case,^*  the  instrument  creating  the  relationship 
among  the  parties  was  also  declared  a  trust  and  not  a  partner- 
ship ;  in  that  case  a  bill  was  filed  asking  for  instructions  by  the 
complainant  as  executor  and  trustee  under  the  will  of  William 
A.  Copeland,  late  of  the  city  of  Providence,  deceased. 

William  A.  Copeland  deceased  on  March  14,  1913,  leaving  a 
last  will  and  testament  by  which  the  complainant  was  appointed 
executor  and  also  trustee  under  certain  trusts  thereby  created. 
The  property  thus  placed  in  trust  included  the  625  shares  in  the 
Martin-Copeland  Company ;  the  complainant  duly  qualified  as 
executor  and  had  now  reached  the  point  in  its  administration  of 
the  estate  where  it  \x2,s  ready  to  transfer  the  residue  to  itself  as 
trustee.  It  alleged  that  it  had  become  uncertain  as  to  some 
questions  involving  the  interpretation  of  the  agreement  of 
August  8,  1912,  under  which  the  Martin- Copeland  Company 
was  organized ;  and  especially  as  to  the  liability  of  the  holders  of 
the  so-called  preferred  stock  thereof ;  the  liability  of  the  trustee 

84  Rhode        Island        Hospital      193,  98  Atl.  273. 
Trust  Co.  V.  Copeland,  39  R.  I. 


Trusts  Distinguished  from  Other  Organizations.  243 

[RHODE   ISLAND   HOSPITAL    TRUST   CO.   v.    COPELAND.] 

when  it  should  come  to  hold  the  same  under  the  trusts  imposed 
by  the  will  of  William  A.  Copeland ;  and  as  to  the  proper  man- 
agement and  disposition  of  such  stock  by  the  trustee  after  it 
should  have  been  duly  transferred  to  it ;  and  formulated  its  re- 
quest for  instructions  as  follows : 

(a)  Whether  under  said  agreement  the  persons  interested 
therein,  the  holders  of  the  so-called  preferred  stock,  are  or  are 
not  under  individual  and  personal  liability  for  any  of  the  obliga- 
tions or  indebtedness  of  the  said  trust  or  association,  and,  if 
so,  whether  the  general  estate  of  the  said  William  A.  Copeland 
beyond  the  amount  represented  by  said  shares  remains  and  will 
remain  liable  until  a  transfer  of  said  shares. 

(b)  Whether  your  orator,  as  executor  or  trustee,  can  con- 
tinue to  hold  said  shares  of  so-called  preferred  stock  without 
making  itself  liable  in  its  own  corporate  capacity  for  any  obliga- 
tion or  indebtedness  of  said  trust  or  association. 

(c)  Your  orator  is  further  in  doubt  whether,  even  if  it 
will  incur  no  personal  liability  under  said  agreement,  it  is  proper 
for  it  to  continue  to  hold  as  trustee  all  of  said  shares  of  stock, 
or  any  part  of  them,  or  whether  it  ought  to  convert  into  cash 
the  whole  or  some  part  thereof,  and  reinvest  the  proceeds  in 
other  trust  securities. 

146 — Declaration   of.    Trust  Determining  Factor   in   What    is 
Created. 

The  first  question  to  be  determined  is  whether  those  inter- 
ested in  the  business  of  the  Martin-Copeland  Company,  called 
stockholders,  are  personally  liable  to  creditors  as  copartners. 
In  other  words,  is  the  Martin-Copeland  Company  a  copartner- 
ship, and  the  several  holders  of  shares  therein  individually  liable 
for  its  debts,  or  is  it  a  true  trust,  where  such  holders  are  only 


244  Trusts  for  Business  Purposes. 

[RHODE   ISLAND   HOSPITAL   TRUST    CO.    v.    COPELAND.] 

cestuis  que  trustent?  In  considering  this  question,  we  must 
first  look  to  the  terms  of  the  agreement  of  August  8,  19 12.  It 
is  entitled  "An  Agreement  and  Declaration  of  Trust."  It  com- 
mences with  a  declaration  of  trust,  and  its  further  provisions, 
embraced  in  some  40  paragraphs,  may  be  briefly  summarized. 
The  name  of  the  company  is  fixed ;  provision  is  made  for  the 
issue  of  shares,  preferred  and  common,  to  be  represented  by 
certificates ;  the  trustees  are  authorized  to  acquire,  hold,  and 
dispose  of  shares  in  the  same  manner  as  though  they  were  not 
trustees;  the  shares  are  made  transferable  both  by  act  of  the 
party,  owner,  or  by  operation  of  law;  the  shareholders'  rights 
are  defined ;  title  to  the  property  is  to  be  in  the  trustees  only ; 
they  are  given  the  most  ample  powers  to  deal  with  the  property 
forming  the  subject-matter  of  the  trust;  they  are  authorized 
to  make  by-laws  and  regulations,  to  represent  the  shareholders 
in  legal  proceedings,  to  indemnify  themselves  or  any  of  them 
from  the  trust  property  for  liabilities  incurred  in  the  carrying 
out  of  the  trust,  and  to  determine  what  is  income  and  what  is 
capital  for  the  purposes  of  the  trust. 

The  number  of  trustees  is  fixed  at  not  more  than  four.  They 
are  authorized  to  appoint  officers ;  the  authority  of  the  officers 
is  outlined;  provision  is  made  for  the  appointment  of  new  trus- 
tees, and  for  authority  to  one  or  more  of  the  trustees  to  dele- 
gate their  powers  to  another  of  the  trustees.  They  are  author- 
ized to  call  meetings  of  the  common  shareholders  at  any  time 
they  see  fit,  and  are  required  to  do  so  on  request  of  the  holders 
of  twenty-five  per  cent,  of  the  common  shares  outstanding. 
Provision  is  made  for  the  calling  of  meetings  of  the  common 
shareholders;  for  the  voting  at  such  meetings  by  proxy  and 
for  share  votes,  40  per  cent  of  the  outstanding  common  shares 
being  required  for  a  quorum. 

The  trustees  are  empowered  to  fix  the  compensation  of  offi- 


Trusts  Distinguished  from  Other  Organizations.  245 

[RHODE    ISLAND   HOSPITAL,   TRUST    CO.   v.   COPELAND.] 

cers  and  agents ;  they  are  especially  prohibited  from  binding  the 
shareholders  personally,  and  the  latter  are  not  to  be  liable  for 
any  assessment.  The  trustee's  acts  within  the  powers  con- 
ferred by  the  agreement  and  declaration  are  done  as  trustees 
and  not  individually,  and  persons  contracting  with  the  trustees 
are  required  to  look  to  the  fund,  and  not  to  the  trustees  per- 
sonally, nor  to  the  stockholders,  for  payment.  No  bond  is  re- 
quired of  any  trustee,  and  each  is  liable  only  for  his  own  wilful 
breach  of  trust.  Any  one  paying  money  or  other  property  to 
the  trustees  is  not  required  to  see  to  the  application  of  the 
money  or  property. 

The  trustees  are  given  power  to  declare  dividends  on  both 
classes  of  shares,  but  the  amount  and  payment  of  them  is  in 
the  sole  discretion  of  the  trustees,  except  that  preferred  divi- 
dends shall  be  at  the  rate  of  6  per  cent  per  annum  and  no 
more,  and  they  have  priority  over  common  dividends.  They 
are  empowered  also  to  create  a  reserve  or  surplus  fund. 

Provision  is  made  for  amending  the  agreement  and  declara- 
tion on  certain  conditions  and  in  a  certain  manner.  The  trusts 
may  be  terminated  by  two-thirds  vote  of  the  common  share- 
holders, and  they  are  limited  in  any  event  to  21  years  after  the 
death  of  certain  identified  persons.  Thereupon  the  afifairs  of 
the  trust  are  to  be  wound  up  in  a  specified  manner. 

147 — Profit  Sharing  in  Relation  to  Partnership. 

The  respondents  have  in  their  brief  referred  to  and  com- 
mented upon  some  of  the  earlier  English  cases  in  which  the 
sharing  of  profits  was  the  test  applied  in  determining  whether 
or  not  a  partnership  existed.  While  these  cases  are  interesting 
and  instructive,  they  do  not  demand  any  particular  notice  at 


246  Trusts  for  Business  Purposes. 

[RHODE   ISLAND   HOSPITAL,   TRUST    CO.   v.   COPELAND.] 

this  time.  In  the  year  i860  the  case  of  Cox  v.  Hickman,^^  after 
having  passed  through  the  inferior  courts  where  the  old  "shar- 
ing profit"  test  had  been  appHed  and  a  partnership  found  to 
exist,  reached  the  House  of  Lords  for  final  decision.  The  de- 
cision was  unanimous.    Lord  Cranworth  said  in  his  opinion: 

"The  law  as  to  partnership  is  undoubtedly  a  branch  of  the 
law  of  principal  and  agent;  and  it  would  tend  to  simplify  and 
make  more  easy  the  solution — the  questions  which  arise  on 
this  subject,  if  this  true  principle  were  more  constantly  kept  in 


view. 


Though  the  case  of  Cox  v.  Hickman  may  have  brought  into 
existence  the  test  of  principal  and  agent  as  embodied  in  a 
judicial  decision,  such  test  had  long  before  been  suggested,  for 
we  find  in  Story  on  Partnership,  Sec.  i  (1841)  : 

"Every  partner  is  an  agent  of  the  partnership;  and  his  rights, 
powers,  duties,  and  obligations  are  in  many  respects  governed 
by  the  same  rules  and  principles  as  those  of  an  agent.  A  part- 
ner, indeed,  virtually  embraces  the  character  both  of  a  principal 
and  of  an  agent." 

In  Cox  v.  Hickman,  Smith  &  Son,  Ironmongers,  etc.,  were 
embarrassed.  A  creditors'  meeting  was  held.  The  creditors 
could  force  bankruptcy,  and  through  a  trustee  take  possession 
of  the  plant  and  business.  Instead,  they  elected  five  trustees, 
who  took  over  the  plant  and  business  and  ran  the  same  for  tlic 
creditors  with  a  provision  for  its  being  turned  back  to  Smith 
&  Son  when  the  creditors  were  paid.  Two  persons  named  as 
trustees,  the  defendants,  who  were  also  creditors,  refused  to 
act  as  trustees.  A  debt  was  contracted  by  the  acting  trustees; 
it  was  represented  by  a  promissory  note  which  was  not  paid. 
Suit  was  brought  against  the  defendants  to   charge  them  as 

86  8  H.  L.  268. 


Trusts  Distinguished  from  Other  Organizations.  247 
[rhode  island  hospital  trust  co.  v,  copeland.] 

partners  because  of  their  signing  the  deed  and  agreeing  to  take 
the  profits  of  the  business  as  conducted  by  the  acting  trustees, 
and  upon  this  point  Lord  Cranworth  said: 

•'I  have  hitherto  considered  the  case  as  it  would  have  stood 
if  the  creditors  had  been  merely  passively  assenting  parties  to 
the  carrjang  on  of  the  trade,  on  the  terms  that  the  profits  should 
be  applied  in  liquidation  of  their  demands.     But  I  am  aware 
that  in  this  deed  special  powers  are  given  to  the  creditors, 
which,  it  was  said,  showed  that  they  had  become  partners,  even 
if  that  had  not  been  the  consequence  of  their  concurrence  in 
the  previous  trust.     The  powers  may  be  described  briefly  as, 
first,  a  power  of  determining  by  a  majority  in  value  of  their 
body,  that  the  trade  should  be  discontinued ;  or,  if  not  discon- 
tinued, then,  secondly,  a  power  of  making  rules  and  orders  as 
to  its  conduct  and  management.     These  powers  do  not  appear 
to  me  to  alter  the  case.    The  creditors  might,  by  process  of  law, 
liave  obtained  possession  of  the  whole  of  the  property.    By  the 
earlier  provisions  of  the  deed  they  consented  to  abandon  that 
riffht,  and  to  allow  the  trade  to  be  carried  on  by  the  trustees. 
The  efifect  of  these  powders  is  only  to  qualify  their  consent. 
They  stipulate  for  a  right  to  withdraw  it  altogether,  or,  if  not, 
then  to  impose  terms  as  to  the  mode  in  which  the  trust  to 
which  they  had  agreed  should  be  executed.    I  do  not  think  that 
this  alters  the  legal  condition  of  the  creditors.     The  trade  did 
not  become  a  trade  carried  on  for  them  as  principals,  because 
they  might  have  insisted  on  taking  possession  of  the  stock,  and 
so  compelling  the  abandonment  of  the  trade,  or  because  tliey 
might  have  prescribed  terms  on  which  alone  it  should  be  con- 
tinued.    Any  trustee  might  have  refused  to  act,  if  he  consid- 
ered the  terms  prescribed  by  the  auditors  to  be  objectionable. 
Suppose  the  deed  had  stipulated,  not  that  the  creditors  might 
order  the  discontinuance  of  the  trade  or  impose  terms  as  to  its 


248  Trusts  for  Business  Purposes. 

[RHODE    ISLAND   HOSPITAI.   TRUST   CO,   v.   COPELAND.] 

management,  but  that  some  third  person  might  do  so,  if,  on 
inspecting  the  accounts,  he  should  deem  it  advisable;  it  could 
not  be  contended  that  this  would  make  the  creditors  partners, 
if  they  were  not  so  already.  And  I  can  see  no  difference  be- 
tween stipulating  for  such  a  power  to  be  reserved  to  a  third 
person,  and  preserving  it  to  themselves." 

In  the  case  of  Wells  Stone  Co.  v.  Grover,^^  where  the  situa- 
tion was  practically  the  same  as  the  case  at  bar,  the  court  said : 

148 — Where  Trustees  are  Master  a  Trust  is  Created. 

"The  trustee  doubtless  was  accountable  in  equity  for  the 
faithful  discharge  of  his  duties  as  such  trustee,  and  a  court  of 
equity  might  in  a  proper  case  interfere.  But  while  the  business 
was  being  managed  by  the  trustee  he  was  absolute  master  there- 
of— ^as  much  as  though  he  himself  had  a  beneficial  interest 
therein.  The  assignor  could  not  dictate  how  the  trustee  should 
conduct  it,  what  purchases  or  sales  he  should  make,  or  have 
the  slightest  voice  in  its  affairs.  It  was  the  business  of  the 
trustee  so  long  as  the  trust  continued,  the  assignor  having  only 
an  indirect  interest  in  the  successful  management  thereof.  He 
was  not  the  proprietor  of  the  business,  and  .the  trustee  was  not 
his  agent.  It  is  always  the  case  that  the  trustee  has  no  interest 
in  the  management  of  the  affairs  confided  to  him  by  the  trust 
instrument,  and  that  the  cestui  que  trust  is  the  only  person  bene- 
ficially interested  therein.  And  yet  it  has  never  been  held,  or 
even  supposed  that  the  beneficiary  is  liable  for  debts  contracted 
by  the  trustee  in  so  handling  the  trust  property  as  to  create  an 
income  for  such  beneficiary." 

In  Smith  v.  Anderson,  supra,  a  case  involving  questions  sim- 
ilar to  the  case  at  bar,  James,  L.  J.  said  in  overruling  the  Mas- 
se?  N.   D.   460,  75   N.   W.   911,     41  L.   R.  A.  252    (1898). 


Trusts  Distinguished  from  Other  Organizations.  249 

[RHODE    ISLAND   HOSPITAL   TRUST    CO.    v.    COPELAND.] 

ter  of  the  Rolls:  "I  cannot  find  that  this  deed  constitutes  any 
association  whatever  between  the  persons;  therefore,  I  cannot 
arrive  at  the  conclusion  that  the  certificate  holders  form  an  as- 
sociation within  the  meaning  of  the  act  of  Parliament."'  Com- 
ing now  to  the  consideration  of  later  cases  involving  the  ques- 
tion as  to  what  constitutes  a  partnership  and  what  a  true  trust, 
the  court  finds  in  Williams  v.  Milton,  supra,  that  there  is  a 
partnership  relation  when  the  certificate  holders  are  associated 
together  by  the  terms  of  the  "trust"  and  are  the  principals 
whose  instructions  are  to  be  obeyed  by  their  agent  who  for 
their  convenience  holds  the  legal  title  to  their  property — the 
property  being  their  property  and  they  being  the  masters.  On 
the  other  hand,  if  there  is  no  association  between  the  certificate 
holders,  the  property  is  the  property  of  the  trustees,  and  the 
trustees  are  the  masters.  Then  the  certificate  holders  have  only 
a  right  to  have  the  property  managed  for  their  benefit.  They 
have  no  right  to  manage  it  themselves,  nor  to  instruct  the  trus- 
tees how  to  manage  it  for  them,  and  it  becomes  a  true  trust. 
As  the  court  further  said,  quoting  from  Mayo  v.  Moritz  :^'' 

"The  scrip  holders  are  cestui  que  trust,  and  are  entitled  to 
their  sliare  of  the  avails  of  the  property  when  the  same  is  sold." 
The  scrip  holders  had  a  common  interest  in  the  trust  fund,  in 
the  same  sense  that  the  members  of  a  class  of  life  tenants  and 
the  members  of  a  class  of  remaindermen  (among  whom  the  in- 
come of  a  trust  fund  and  the  corpus  are  to  be  distributed  re- 
spectively) have  a  common  interest.  But  in  Mayo  v.  Moritz, 
supra,  there  was  no  association  among  the  certificate  holders 
just  as  there  is  no  association,  although  a  common  interest, 
among  the  life  tenants  or  the  remaindermen  in  an  ordinary 
trust.    The  certificate  holders  or  cestui  que  trustcnt  as  they  are 

87151    Mass.    481-4,    24    N.    E.   1083. 


250  Trusts  for  Business  Purposes. 

[rhode  island  hospital  trust  co.  v.  copeland.] 

called  in  the  trust  deed,  have  a  common  interest  in  precisely  the 
same  sense  that  members  of  a  class  of  life  tenants  (among 
whom  the  income  of  a  trust  fund  is  to  be  distributed)  have  a 
common  interest,  but  they  are  not  socii,  and  it  is  the  trustees 
and  not  the  certificate  holders  who  are  the  masters  of  the  trust 
property.  The  sole  right  of  the  cestuis  que  trust  is  to  have  the 
property  administered  in  their  interest  by  the  trustees  who  are 
the  masters,  to  receive  income  while  the  trust  lasts  and  their 
share  of  the  corpus  when  the  trust  comes  to  an  end.^^ 

When  we  examine  the  agreement  of  August  8,  1912,  under 
which  the  Martin-Copeland  Company  was  organized,  in  the 
light  of  the  authorities  which  we  have  cited,  we  cannot  escape 
the  conclusion  that  such  agreement  evidences  both  in  intention 
and  in  law  a  true  trust,  and  not  a  partnership. 

Not  Subject  to  Corporation  Acts. 

149 — In  General. 

Corporations  are  the  creatures  of  franchise;  they  exist,  not 
as  a  matter  of  right,  but  from  a  privilege  granted  by  the  state; 
they  have  a  capital  stock,  a  board  of  directors  and  ofificers.  A 
trust  is  created  as  a  matter  of  right,  it  has  its  estate  the  title 
and  control  of  which  is  in  the  trustees,  it  may  have  transferable 
beneficial  interests  and  officers.  In  effect,  the  functioning  of 
these  two  organizations  is  practically  the  same,  and  for  that 
reason  the  question  is  raised  as  to  whether  the  trust  may  not 
be  brought  under  the  control  of  the  corporation  law.  That  the 
trust  is  not  a  corporation  has  been  definitely  and  decisively  set- 

88  Also  Hussey  v.  Arnold,  185  350,  41  Am.  Dec.  389;  Burt  v. 
Mass.  202,  70  N.  E.  87;  Makin  Lathrop,  52  Mich.  106,  17  N.  W. 
V.    Savings    Institution,    23    Me.      716. 


Trusts  Distinguished  from  Other  Organizations.  251 

tled;^^  if  it  is  not  a  corporation,  it  may  not  be  subjected  to  cor- 
poration acts  for  the  reason  that  the  underlying  principles 
governing  a  trust  are  entirely  different  from  those  of  a  corpora- 
tion. The  rules  and  regulations  governing  the  latter  are  to  be 
found  in  the  statutes  of  the  various  states  and  in  the  corporate 
law  which  essentially  is  the  authority  for  what  a  corporation 
may  do. 

The  trust  is  founded  upon  a  right,^°  it  is  organized  as  a  right, 
and  as  such  may  do  exactly  what  a  citizen  or  an  individual  may 
do.  The  reverse  is  true  of  a  corporation  whose  action  is  re- 
stricted to  the  law  of  its  creation.  The  principle  that  the  trust 
is  not  subject  to  the  rule  of  law  governing  the  corporation  is 
set  forth  in  the  decision  of  State  v.  Lee.^^  In  this  case  a  trust 
was  organized  in  St.  Louis,  Missouri,  known  as  the  Great 
American  Home  Savings  Institution,  for  the  purpose  of  con- 
ducting a  building  and  loan  association.  The  state  refused  to 
issue  a  certificate  authorizing  the  trust  to  do  business ;  suit  was 
instituted  against  the  state  in  which  the  trust  asked  for  a  writ  of 
mandamus  commanding  that  the  certificate  of  authorization  to 
do  business  be  issued  to  it.  The  state  set  forth  that  the  peti- 
tioners were  not  a  legal  entity  and  not  a  trust ;  but  that  they 
were  a  limited  partnership  and  were  subject  to  the  corporate 
law  of  Missouri.  The  points  raised  in  this  case,  the  arguments 
advanced,  and  the  unanimous  decision  of  all  the  sitting  judges 
that  a  trust  is  not  subject  to  the  corporation  law,  are  of  such 
value  to  this  subject  that  the  case  is  reported  practically  in  full, 
as  follows: 

89  See    Trust     as    an     Entity.  Baker-McGrew   Co.   v.   Union    S. 

Elliott  V.  Freeman,  220  U.  S.  178,  &  T.  Co.,  125  Ark.  146,  188  S.  W. 

55    L.    Ed.    424;     Spotswood    v.  802. 

Morris,  12  Idaho  360,  6  L.  R.  A.  90  See     Rights     Distinguished 

(N.  S.)   665,  85  Pac.  1094;   Glea-  from  Law. 

son   V.    McKay,    134    Mass.    419;  91  233  S.  W.  20. 


252  Trusts  for  Business  Purposes. 

The  Great  American  Home  Savings  Institution  is  a  voluntary 
unincorporated  association  of  individuals  formed  for  the  pur- 
pose of  accumulating  a  fund  or  funds  to  be  used  under  the 
terms  of  the  trust  agreement  for  the  purpose  of  enabling  the 
contributors  to  such  fund  or  their  assigns  to  secure  a  loan  or 
loans  for  the  purpose  of  acquiring  a  dwelling  house  or  farm,  or 
other  income-producing  property,  or  discharging  a  mortgage  or 
other  incumbrance  thereon.  The  business  intended  to  be  car- 
ried on  under  said  trust  agreement  is,  to  all  practical  intents 
and  purposes,  the  same  as  the  business  now  being  conducted  by 
corporations  doing  a  building  and  loan  association  business  in 
this  state. 

Said  trust  agreement  provides  for  the  issuance  of  trustees' 
certificates  in  the  amount  not  exceeding  $100,000  to  provide  an 
initial  fund  which  is  in  the  nature  of  a  permanent  guaranty 
fund  and  furnishes  funds  to  meet  immediate  loan  demands, 
and  is  to  stand  as  a  guaranty  to  the  maintenance  of  the  loan 
and  trust  fund.     The  trust  agreement  further  provides  for  the 
issuance  of  trust  certificates  on  the  monthly  installment  plan 
in  denominations  of  $1,000  and  multiples  of  $100  in  excess 
thereof.    The  holders  of  said  trust  certificates  are  to  pay  there- 
on in  monthly  payments  the  sum  of  $6.50  per  $1,000  face  value 
for  a  period  of  132  months.    The  loan  and  trust  fund  is  created 
from  these  monthly  payments  by  setting  aside  $6.20  per  month 
out  of  each  monthly  payment  after  the  first  three  payments, 
and  said  fund  is  to  be  maintained  upon  a  4  per  cent  basis,  com- 
pounded monthly,  which  is  the  liability  of  the  Great  American 
Home  Savings  Institution  on  account  of  said  fund.    The  Great 
American   Home   Savings   Institution  agrees  to   establish  and 
maintain  said  loan  and  trust  fund  at  all  times  unimpaired.    The 
first  three  monthly  payments  of  $6.50  and  30  cents  of  each  sub- 
sequent payment  of  $6.50  per  each  $1,000  face  value  of  certifi- 


Trusts  Distinguished  from  Other  Organizations.  253 

cates  shall  belong  to  the  general  funds  of  the  trust  and  will  be 
available  for  overhead  and  operating  expenses. 

The  trust  agreement  further  authorizes  the  issue  of  a  "full- 
paid  interest-bearing  certificate"  subject  to  the  approval  of  the 
Supervisor  of  Building  and  Loan  Associations.  Hence  the 
Great  American  Home  Savings  Institution  has  three  sources 
available  for  raising  funds  to  make  loans  to  home  builders: 
First,  by  the  issuance  of  $100,000  of  trustee  certificates  which 
cannot  be  issued  for  less  than  their  par  value ;  second,  the  issu- 
ance of  the  installment  trust  certificates;  and,  third,  the  issu- 
ance of  full-paid  interest-bearing  certificates. 

150 — Rights  of  Certificate  Holders. 

The  owner  of  the  trust  certificate  shall  be  entitled  to  a  loan 
equal  to  its  face  value  to  be  made  from  the  "loan  and  trust 
fund"  (or  from  funds  created  by  the  issuance  of  trustees'  cer- 
tificates) in  the  order  of  written  application  made  therefor  and 
subject  to  the  rights  and  priorities  of  other  certificate  owners — 
the  security  tendered  for  said  loan  being  satisfactory.    The  said 
loan  shall  be  made  only  for  the  purpose  of  the  purcliase  or 
building  of  a  home,  purchase  of  farm,  or  other  improved  in- 
come property,  or  making  improvements  thereon  or  paying  ofl"* 
mortgage,  deed  of  trust,  or  other  incumbrances  existing  there- 
on.   In  the  event  a  certificate  owner  does  not  avail  himself  of 
the  borrowing  privilege,  then  at  the  end  of  1 1  years  he  collects 
his  investment  plus  his  share  of  the  surplus  profits  earned  in 
the  "loan  and  trust  fund,"  not  to  exceed  $308  per  $1,000  face 
value  of  the  certificate,  which  means  the  maximum  amount  to 
be  repaid  on  the  $1,000  trust  certificate  held  by  one  who  has 
not  exercised  the  loan  privilege  and  has  deposited  132  monthly 
payments  of  $6.50  (or  a  total  of  $858)  is  $1,308.     However, 
$1,000  is  the  guaranteed  liability  of  the  institution. 


254  Trusts  for  Business  Purposes. 

Loans  made  from  the  loan  and  trust  fund  under  the  terms 
of  the  trust  certificate  are  to  be  repaid  by  the  borrower  in  132 
monthly  installments  of  $11.19  per  $1,000,  which  cover  both 
principal  and  interest  on  the  loan.  In  other  words,  any  one 
who  borrows  $1,000  from  the  loan  and  trust  fund  repays  the 
Great  American  Home  Savings  Institution  in  132  monthly  pay- 
ments of  $11.19  each,  or  an  aggregate  of  $1,477.08,  which  is  a 
return  of  the  principal  v/ith  interest  at  the  rate  of  7.72  per  cent, 
per  annum.  By  reference  to  the  actuarial  opinions  of  Messrs. 
Harvey  and  Shepherd,  the  sum  of  $6.20  per  month  set  aside  to 
the  loan  and  trust  fund  from  the  $6.50  monthly  payment  by 
the  holder  of  trust  certificate  for  132  months,  less  the  first 
three  payments,  improved  with  interest  at  the  rate  of  7.72  per 
cent,  earned  on  loans,  will  equal  $1,248.37  at  the  end  of  the 
time.  That  is,  the  individual  share  of  each  certificate  owner  in 
this  ftmd  and  its  earnings  at  7.72  per  cent,  interest  will  amount 
to  $1,248.37  per  $1,000  face  value  of  certificate,  and  since  the 
liability  assumed  on  the  certificate  is  limited  to  $1,000,  this  ac- 
tuarial opinion  shows  a  surplus  profit  earned  on  the  money  set 
aside  to  the  loan  and  trust  fund  for  the  "exclusive  benefit  and 
profit  of  certificate  owners"  of  $248.37  on  each  individual  cer- 
tificate of  $1,000.  But  under  the  terms  of  the  certificate  "all 
surplus  earnings  from  interest,  fines,  transfer,  and  waiver  fees, 
cash  surrender,  and  partial  paid-up  values"  belong  to  the  non- 
borrowing  owners  of  trust  certificates,  to  the  "extent  of,  but 
not  to  exceed,  a  total  surplus  of  $308  per  $1,000  face  value." 
So  that  the  Great  American  Home  Savings  Institution  does  not 
profit  by  the  earnings  from  these  sources  on  account  of  the 
$6.20  placed  in  the  loan  and  trust  fund  unless  said  earnings 
exceed  $308  per  $1,000. 


Trusts  Distinguished  from  Other  Organizations.  255 

151 — Cash  Surrender  Value  of  Trust  Certificate. 

The  loan  privilege  provides  that — 

"When  loan  is  made  for  any  of  the  purposes  defined  herein, 
this  certificate  may  be  surrendered,  in  v^hich  event  the  owner 
shall  be  credited  with  its  accrued  value,  equal  to  $6.20  of  each 
monthly  deposit  made  on  each  $1,000  face  value  of  this  certifi- 
cate less  the  first  three,  with  interest  at  the  rate  of  6  per  cent, 
per  annum,  which  may  be  applied  as  part  equity  requirements 
for  said  loan  or  withdrawn  in  cash  at  the  option  of  the  owner." 

Trust  certificates  become  nonforfeitable  after  four  monthly 
deposits  have  been  made ;  that  is,  the  holder  may  surrender  his 
certificate  and  receive  in  lieu  thereof  a  paid-up  certificate  for 
the  total  amount  paid  in,  less  the  first  three  payments,  which 
paid-up  certificate  matures  11  years  from  date  with  interest  at 
5  per  cent,  per  annum. 

The  trust  certificate  gives  its  owner  a  cash  surrender  priv- 
ilege at  the  end  of  3  years  or  at  the  end  of  any  year  thereafter 
equal  to  $6.20  of  each  monthly  deposit  made,  less  the  first  three 
payments,  with  interest  at  the  rate  of  5  per  cent,  per  annum 
thereon,  plus  its  share  of  surplus  earned,  not  to  exceed  2  per 
cent,  more,  or  certificate  owner  may  borrow  80  per  cent,  of  the 
accrued  cash  value  after  one  year  at  8  per  cent,  discount  by 
giving  certificates  as  collateral  security. 

152 — Duties  of  Directors. 

The  affairs  of  the  Great  American  Home  Savings  Institution 
are  under  the  general  direction  of  a  board  of  directors  selected 
by  the  holders  of  trustees'  certificates.  The  board  of  directors 
shall  cause  a  full  and  accurate  set  of  books  of  account  to  be 
kept  in  which  shall  be  kept  a  full  record  of  all  of  the  transac- 
tions of  the  institution,  and  a  full  report  of  the  financial  con- 


256  Trusts  for  Business  Purposes. 

dition  shall  be  made  by  the  president  of  the  trust  at  all  annual 
meetings  of  the  trustees.  The  board  of  directors  shall  be 
charged  with  the  duty  of  taking  proper  action  by  all  proper 
methods  in  order  to  afford  a  proper  and  equitable  administra- 
tion of  the  affairs  and  business  of  the  trust. 

Under  the  plan  of  organization  and  operation  and  under  the 
law  which  relators  seek  to  do  business,  the  trustees  or  managers 
of  the  Great  American  Home  Savings  Institution  shall  from 
time  to  time  furnish  such  surety  bonds  to  secure  the  faithful 
performance  of  their  trusts  as  may  be  required  by  the  Super- 
visor of  Building  and  Loan  Associations  of  Missouri,  and  the 
Great  American  Home  Savings  Institution  shall  be  subject  to 
the  supervision  and  examination  of  the  Supervisor  of  Building 
and  Loan  Associations  of  Missouri,  similar,  in  so  far  as  ap- 
plicable, to  his  supervision  and  examination  of  building  and 
loan  associations. 

153 — Trustees'  Certificates  Assignable. 

This  is  not  a  case  of  a  capitalized  association  seeking  incor- 
poration, as  a  bank  or  trust  company,  which  must  have  a  certain 
proportion  of  its  stock  paid  up.  The  statute  provides  "that  no 
such  association  shall  commence  business  in  this  state  until  it 
shall  first  submit  to  the  Supervisor  of  Building  and  Loan  Asso- 
ciations a  detailed  statement  of  its  plan  of  doing  business  and 
a  copy  of  the  contracts  proposed  to  be  issued,  and  procure  from 
him  a  certificate  authorizing  it  to  do  business."  Under  this 
clear  mandate,  no  steps  can  be  taken  towards  the  accumulation 
of  a  fund  until  the  authority  to  do  business  has  been  obtained. 
The  objection  that  the  trustee  certificates  are  assignable  and 
trustees  become  or  cease  to  be  trustees  by  the  mere  purchase  or 
sale  of  trust  certificates,  without  any  right  in  the  creators  and 


Trusts  Distinguished  from  Other  Organizations.  257 

beneficiaries  to  object,  is  without  merit.  The  right  to  sell  is 
incident  to  ownership.  We  are  unable  to  see  any  valid  objection 
to  the  plan  of  doing  business  or  the  election  of  officers.^^  It  is 
a  matter  that  concerns  the  contracting  parties,  purely  a  matter 
of  convention,  unless  contrary  to  the  statute. 

An  association  being  solely  a  creature  of  convention  between 
the  members,  no  check  exists  upon  its  power  to  enact  such 
constitution  or  by-laws  as  the  associates  may  choose  to  adopt, 
so  long  as  they  do  not  provide  for  the  commission  of  illegal  acts, 
are  not  in  themselves  contrary  to  public  policy,  or  do  not  afifect 
vested  interests.  Such  constitution  and  by-laws  constitute  a 
contract  between  the  members,  and  are  binding  alike  on  the 
association  and  its  members.  The  courts  possess  no  power  to 
pass  on  the  question  of  the  reasonableness  of  such  rules  and 
regulations  as  are  agreed  to  by  associates  for  the  conducting  of 
their  joint  affairs.  It  has  been  uniformly  held,  however,  that 
the  courts  may,  in  a  proper  case  construe  and  fix  their 
meaning.^3 

Counsel  for  relators  sum  up  the  matter  in  their  brief  : 

"No  valid  objection  can  be  made  that  the  trustee  certificates 
are  to  be  assignable.  The  assignability  of  such  certificates  has 
long  been  recognized  at  common  law.''^* 

The  trust  agreement  makes  full  provision  for  safeguarding 
the  rights  of  the  beneficiaries.  It  is  shown  by  the  best  actuarial 
authority  in  this  state  that  the  plan  is  financially  sound.  In 
fact,  this  is  conceded  by  the  pleadings  in  this  case,  and  respond- 
ent makes  no  point  in  that  regard.  When  this  is  considered  in 
connection  with  the  further  fact  that  the  trustees  managing 

92  state    ex    rel.    v.    Swanger,  93  4  Cyc.  305. 

190  Mo.  561,  loc.  cit.  570.  89   S.  94  King  v.  Webb,  14  East  406; 

W.  872,  2  L.  R.  A.    (N.  S.)    121,  Warner  &  Roy  v.  Beers  (N.  Y.), 

4  Ann.  Cas.  563.  23  Wend.   103. 


258  Trusts  for  Business  Purposes. 

this  trust  are  at  all  times  subject  to  the  control  of  a  court  of 
equity  and  by  virtue  of  section  10263,  supra,  are  under  the 
constant  supervision  of  the  Supervisor  of  Building  and  Loan 
Associations  of  Missouri,  it  becomes  difficult  to  conceive  how 
stronger  safeguards  could  be  made  to  protect  the  investing 
public. 

154 — Trust  Agreement  Does  Not  Create  a  Partnership.  ■ 

In  the  brief,  however,  counsel  for  the  amicus  curiae  contend 
that  the  relator  association  is  a  partnership,  and  it  cannot  limit 
its  liabilit}'-.  This  issue  is  not  made  in  the  pleadings.  If  it 
were,  it  would  be  inconsistent  with  other  contentions  in  the 
brief,  that  it  is  a  bond  investment  company,  a  corporation,  that 
it  has  no  legal  entity  or  artificial  personality,  that  it  is  a  co- 
operative association  and  a  lottery.  How  can  it  be  all  these? 
How  it  can  assume  these  protean  characters  at  one  and  the  same 
time  is  bewildering.  The  declaration  that  it  is  a  corporation  is 
a  solemn  negation  that  it  is  a  partnership,  or  a  joint-stock  com- 
pany, or  a  bond  investment  company.  The  pleas  are  inconsist- 
ent and  self-destructive.^^  If  it  is  a  lottery,  it  is  an  outlaw  and 
all  contracts  made  with  it  are  void. 

Counsel  cite,  in  support  of  their  contention  that  it  is  a  part- 
nership.^^ Ji-^dge  Bond  was  there  considering  the  liability  of  a 
member  of  a  joint-stock  company  engaged  in  manufacturing 
and  trading  to  its  creditors.    The  learned  jurist  said,  at  page  63  : 

"While  there  is  some  variance  in  the  authorities  as  to  what 
steps  must  be  taken  before  the  members  become  liable  in  this 

96  Wertheiner-Swartz  Shoe  Co.  better,  v.  Ledbetter,  88  Mo.  loc. 

V.  McDonald,  138  Mo.  App.  328,  cit.  62,  31  Cyc.  150. 

loc.  cit.  339,  122  S.  W.  5;  Barrett  96  Laney  v.  Fickel,  83  Mo.  App. 

V.    Donnelly,    38    Mo.    492;    Led-  60. 


Trusts  Distinguished  from  Other  Organizations.  259 

manner  to  third  parties,  all  the  cases  are  agreed  that  such  lia- 
bility is  consummate  upon  a  showing  that  the  member  joined 
the  association,  attended  its  meetings,  and  consented  to  the 
engagement  out  of  which  the  liability  arose.^'^  The  case  at 
bar  presents  all  these  elements  of  liability  in  plaintiff's  connec- 
tion with  the  company.  He  was  therefore  liable  as  a  copartner 
with  his  other  associates  for  the  claim  sued  upon  by  him,  since 
they  were  valid  obligations  against  the  joint-stock  company 
itself." 

It  is  thus  seen  that  the  liability  of  the  member  was  bottomed 
on  his  consent,  while  a  partner  is  liable  for  the  acts  of  the  other 
partners  in  a  trading  concern  within  the  scope  of  the  partner- 
ship business,  whether  he  consents  or  not.^' 

155 — Liability  Limited  to  Trust  Funds. 

The  limitations  on  the  liability  of  members  is  found  in 
paragraphs  B  and  M  of  the  articles  of  association,  which  read : 

"(B)  That  no  trustee,  director,  or  officer  of  said  savings  in- 
stitution shall  be  personally  liable  for  any  debts  properly 
chargeable  against  said  institution,  or  any  fund  or  funds 
thereof. 

(M)  That  trustee  certificates  shall  be  issued  to  each  trustee 
evidencing  their  interest  in  such  form  as  the  directors  may  pro- 
vide, and  said  certificates  shall  contain  a  clause  providing  that 
when  the  same  has  been  paid  in  cash  at  its  par  value  the  liability 
of  said  trustee  is  limited  to  the  funds  invested  therein." 

It  must  be  remembered  that  this  is  a  non-trading  concern. 
In  Coleman  v.  Knights  of  Honor,®^  Ji-^dge  Rombauer  said : 

97  Hunnewell         v.         Willow  98  30  Cyc.  503  et  seq. 

Springs  Canning  Co.,  53  Mo.  App.  99  18  Mo.  App.  189,  194. 

245. 


26o  Trusts  for  Business  Purpose;s, 

"Nor  can  we  see  how  the  member  or  those  claiming  under 
him  can  be  heard  to  assert  that  the  rules  established  by  the 
corporation  in  that  regard  were  not  reasonable.  The  member  is 
a  voluntary  party  to  the  compact,  and  as  such  bound  by  it  unless 
it  is  in  derogation  of  some  charter  right,  or  is  otherwise  invalid 
as  contravening  some  paramount  provision  of  law.  A  by-law 
may  be  void  as  to  strangers,  or  members  who  do  not  assent  to  it, 
and  yet  good  as  a  contract  between  members  of  the  corporation 
who  do  assent  to  it." 

In  State  v.  Stone,^*'"  the  defendant  represented  as  agent  an 
association  of  lOO  residents  of  the  state  of  New  York  who  were 
conducting  insurance  upon  the  manner  of  the  ancient  Lloyds 
before  said  individuals  had  procured  a  license  to  do  business  in 
Missouri.  By  the  terms  of  the  agreement  or  articles  of  asso- 
ciation, each  of  the  loo  subscribers  agreed  to  deposit  $i,ooo, 
and  it  was  stipulated  that  each  subscriber  should  be  separately 
liable  to  the  amount  authorized  by  him  individually,  and  not 
jointly  liable  with  the  other  subscribers.     Judge  Burgess  said: 

"If,  then,  we  are  correct  in  our  position  in  construing  the 
statute  as  including  and  meaning  individuals,  there  is  no  ap- 
parent reason  why  defendant  could  not  have  obtained  from 
and  why  the  insurance  commissioner  could  not  have  issued  to 
him  a  valid  certificate  under  sections  5910  and  591 1  of  the 
statute,  if  defendant  had  shown  to  him  that  those  whom  he 
represents  had  complied  with  the  law  in  regard  to  insurance 
companies  doing  business  in  this  state." 

In  Hammerstein,  Ex'r.,  v.  Parsons,*  syllabus  i  reads : 

"While  the  members  of  an  unincorporated  association  are 
partners  inter  sese,  their  rights  against  each  other  miay  be  lim- 

100  118   Mo.  388,  24   S.  W.   164,       388. 
25  L.  R.  A.  243,  40  Am.  St.  Rep.  2  38  Mo.  App.  332. 


Trusts  Distinguishe;d  from  Other  Organizations.  261 

[STATE   V.    I>EE.] 

ited  by  contract,  and  the  constitittion  and  by-laws  of  the  asso- 
ciation constitute  a  contract  between  them." 

So,  while  the  question  is  not  raised  by  the  pleading  and  need 
not  be  considered,  it  is  clear  that  it  was  competent  for  the 
members  to  contract  as  to  their  liability  inter  sese.^ 

156 — Corporation  Act  not  Applicable  to  Trusts. 

It  is  contended  that  relator  must  be  incorporated  before  it 
can  do  business ;  that  the  power  to  sue  and  be  sued,  to  acquire, 
sell,  and  convey  property,  to  do  business  as  a  legal  entity  and 
the  powers  incident  thereto,  are  sovereign  grants  of  powers 
possessed  only  by  corporations,  and  it  is,  therefore,  subject  to 
the  chapter  on  corporations. 

The  answer  to  this  contention  is  the  statute  itself.  Section 
10263,  R-  S.,  expressly  exempts  associations  of  the  character 
mentioned  there  in  from  the  other  provisions  of  article  10,  c.  90, 
R.  S.  The  emergency  clause  of  that  act  declares  that  "such 
associations  are  not  prohibited  by  law  and  should  be  en- 
couraged." By  that  act  the  legislature  declared  the  policy  of 
the  state. 

But  it  is  said  that  the  assumption  of  corporate  powers  with- 
out a  sovereign  grant,  brings  an  unincorporated  association 
within  the  definition  of  a  corporation.  The  statute  itself  is 
the  sovereign  grant.  Rut  for  this  enactment,  associations  of 
the  cliaracter  authorized  thereby  could  not  exist. 

Respondent  contends  that  these  associations  are  corporations 
by  force  of  section  11  of  article  12  of  our  Constitution,  which 
reads: 

"The  term  corporation  as  used  in  this  article  shall  be  con- 
strued to  include  all  joint-stock  companies  or  associations  hav- 

8  See  citation  from  4  Cyc.  305. 


262  Trusts  for  Business  Purposes. 

ing  any  powers  or  privileges  not  possessed  by  individuals  or 
partnerships." 

In  Williams  v.  U.  S.  Express  Co.,*  the  defendant  contended 
that,  being  a  joint-stock  company,  it  was  not  a  suable  entity, 
The  court  held  (quoting  section  2963,  R.  S.  1909,  now  section 
9722.  R.  S.  1919,  which  is  a  copy  of  the  section  of  the  Constitu- 
tion referred  to)  that: 

"A  joint-stock  company  at  common  law  was  a  hybrid  mid- 
way between  a  corporation  and  a  partnership,  e.  g.,  it  had  di- 
rectors and  officers,  articles  of  association,  a  common  capital 
divided  into  shares ;  these  shares  represented  the  interest  of  the 
members,  v/ere  transferable  without  the  consent  of  the  other 
members ;  hence  there  was  no  delectus  personae,  and  the  death 
of  the  member  did  not  dissolve  the  compan3^^  Construing  to- 
gether sections  2963  and  2990  of  article  i,  c.  33,  Revised  Stat- 
utes 1909,  and  section  1760,  art.  4,  c.  21,  Revised  Statutes  of 
1909,  we  cannot  but  arrive  at  the  conclusion  that  the  defendant, 
being  a  joint-stock  company,  and,  therefore,  having  powers  and 
privileges  not  possessed  by  individuals  and  partnerships,  must 
be  treated  as  a  corporation  for  the  purposes  of  said  chapters  33 
and  21,  and  as  such  can  "sue  and  be  sued,  complain  and  defend 
in  any  court  of  law  or  equity'  as  a  legal  entity." 

In  Weihtuechter,  et  al.  v.  Miller,^  White,  C,  referring  to 
Williams  v.  U.  S.  Express  Co.,  supra,  and  other  cases,  shows 
that  joint-stock  companies  have  been  recognized  as  entities  en- 
titled to  sue  and  be  sued,  and  that  the  "legislature  evidently 
understood  that  such  associations  (voluntary  unincorporated 
associations)  could  be  sued,  for  by  the  act  of  191 5  they  pro- 

4195  Mo.  App.  362,  191  S.  W.  Co.  et  al.,  196  Mo.  loc.  cit.  536. 
1087.  6  276  Mo.  633  loc.  cit.  329,  208 

6  State     ex     rel.     Pearson     v.  S.  W.  39. 
Louisiana   &  Missouri  River  R. 


Trusts  Distinguished  from  Other  Organizations.  263 

vided  a  method  for  service  of  process  upon  them  the  same  as 
upon  corporations.    Laws  191 5,  p.  225." 

In  Great  Southern  Fire  Proof  Hotel  Co.  v.  JonesJ  the  court, 
in  construing  a  similar  article  in  the  Constitution  of  Pennsyl- 
vania, said : 

"The  only  effect  of  that  clause  is  to  place  the  joint-stock 
companies  or  associations  referred  to  under  the  restrictions 
imposed  by  that  article  upon  corporations,  and  not  to  invest 
them  with  all  the  attributes  of  corporations." 

This  contention  was  made  in  Spotswood  v.  Morris,^  and  the 
section  of  the  Idaho  Constitution  identical  with  section  ii, 
supra,  was  cited.     In  disposing  of  the  point  Sullivan,  J.,  said: 

"The  association  under  consideration  is  not  a  corporation  ex- 
ercising any  of  the  powers  or  privileges  of  corporations  not 
possessed  by  individuals  or  partnerships.  It  is  a  voluntary  as- 
sociation. To  possess  or  exercise  powers  or  privileges  of  cor- 
porations requires  a  sovereign  grant — a  franchise  which  said 
association  has  not  and  does  not  profess  to  possess."^ 

The  court  noted  the  fact  that  eighteen  states,  among  them 
Missouri,  had  practically  identical  sections  defining  corporations 
in  their  constitutions. 

It  is  obvious  that  the  article  of  the  Constitution  and  statute 
referred  to  do  not  by  legislative  fiat  convert  joint-stock  com- 
panies or  voluntary  associations  into  corporations  or  require 
their  incorporation  before  doing  business.  At  common  law 
voluntary    unincorporated    associations    could    not    sue    or    be 

7  177  U.  S.  449,  20  Sup.  Ct.  690,  ganized  as  a  matter  of  right  re- 
44  L.  Ed.  842.  quires     no    grant    or    franchise 

8  12  Idaho  360,  85  Pac.  1094,  6  from  the  state.  See  "Rights  Dis- 
L.  R.  A.    (N.  S.)    665.  tinguished  from  Law." 

9  Note:      The    trust    being    or- 


264  Trusts  for  Business  Purposes. 

[STATE   V.    LEE.l 

sued.i"  By  an  amendment  to  Section  1760,  R.  S.  1909,  suits 
may  be  brought  against  any  such  association  "in  the  name  it  has 
selected."  Section  1186,  R.  S.  1919.  Respondent  will  not 
contend  that  this  amendment  required  such  societies  to  be  in- 
corporated or  made  them  corporations. 

The  contention  that  the  relator  association  is  a  bond  invest- 
ment company  and  cannot  do  business  v.-ithout  compliance  with 
sections  10333-10338,  R.  S.  1919,  is  unsound  for  the  reason  that 
it  is  not  a  corporation  nor  does  it  seek  to  do  a  bond  investment 
business  within  the  meaning  of  the  statute  referred  to. 

Section  10263,  I^-  S.  1919,  under  which  relator  seeks  to  do 
business,  is  a  part  of  article  10,  c.  90,  R.  S.  1919,  and  expressly 
exempts  associations  organized  under  it  from  compliance  with 
the  other  sections  of  that  article.  The  legislature,  in  its  wis- 
dom, has  required  that  every  association  organized  under  this 
section  shall  submit  to  the  Supervisor  of  Building  and  Loan 
Associations  a  detailed  statement  of  its  plans,  etc.,  and  procure 
from  him  a  certificate  authorizing  it  to  do  business,  and  im- 
poses on  the  Supervisor  the  duty  of  examining  into  such  asso- 
ciation and  if  it  is  not  in  conflict  with  the  laws  and  Constitution 
of  this  state,  he  shall  issue  his  certificate  authorizing  it  to  do 
business.  This  requirement  is  exclusive.  The  relator  is  not 
required  to  obtain  permission  to  do  business  from  the  State 
Bank  Commissioner  under  section  11919,  R.  S.  1919,  common- 
ly called  the  "Blue  Sky  Law."  "Expressio  unius  est  exclusio 
alterius." 

157 — l^rust  Protected  in  Trade  Name. 

It  is  claimed  in  the  return  that  the  name  of  the  association 

10  Lilly  V.  Tobbein,  103  Mo.  477      Rep.  887. 
(8),    15    S.   W.    618,   23   Am.    St. 


Trusts  Distinguished  from  Other  Organizations.  265 

"Great  American  Home  Savings  Institution"  is  an  imitation  of 
the  American  Home  Building  &  Loan  Association,  a  corpora- 
tion domiciled  in  the  city  of  St.  Louis,  or  is  so  near  thereto  as 
to  be  likely  to  mislead  the  public.  It  is  admitted  by  the  plead- 
ings that  prior  to  the  time  relators  applied  for  a  certificate  to 
do  business  relators  were  advised  by  the  then  Secretary  of 
State  that  the  name  adopted  "was  available  for  their  use.  and 
that  same  did  not  conflict  with  any  corporate  name  then  in  use 
in  this  state. 

The  name  of  a  corporation  or  of  an  unincorporated  associa- 
tion is  a  necessary  element  of  its  existence,  and  the  right  to  its 
exclusive  use  will  be  protected  upon  the  same  principle  that  per- 
sons are  protected  in  the  use  of  trade-marks.^^  In  Supreme 
Lodge,  Knight  of  Pythias,  v.  Improved  Order  Knights  of 
Pythias,^2  jj-  ^vas  held  that  the  latter  name  was  not  an  infringe- 
ment on  the  former.    The  court  said: 

"To  me  it  is  self-evident  that  no  careful  person  could  think 
that  these  two  orders  were  identical,  and,  as  lias  been  said,  in 
cases  of  this  class  the  question  is  whether  the  similarity  is  cal- 
culated to  mislead  the  ordinary  run  of  mankind.  There  cer- 
tainly is  just  as  much  distinction  between  these  two  names  as 
there  is  between  that  of  the  Episcopal  Church  and  the  Reformed 
Episcopal  Church,  or  that  of  the  Presbyterian  Church  and  the 
United  Presbyterian  Church." 

We  think  there  is  little,  if  any,  resemblance  between  the  name 
of  the  relator  association  and  that  of  the  American  Home 
Building  &  Loan  Association,  at  least  none  that  is  calculated  to 
mislead  the  ordinary  run  of  mankind. 

H  State  ex  rel.  v.  McGrath,  92  12  113  Mich.  133,  71  N.  W.  470, 

Mo.  355,  loc.  cit.  357,  5  S.  W.  29,      38  L.  R.  A.  658. 
5  C.  J,  1343    (31). 


266  Trusts  for  Business  Purposes. 

158 — Business   Under   Trust  Agreement   Enjoys   No   Special 
Privileges. 

Respondent  contends  that  section  10263,  R.  S.,  denies  the 
equal  protection  of  the  law,  in  violation  of  section  i,  art.  14  of 
the  Amendments  to  the  Constitution  of  the  United  States,  in 
that  it  allows  the  association  referred  to  to  be  licensed,  super- 
vised, and  examined  without  cost  to  such  association,  and 
throws  the  burden  of  the  expense  thereof  upon  the  building 
and  loan  associations.  Section  10230,  R.  S.  1919,  provides 
that  every  incorporated  building  and  loan  association  shall  make 
semi-annual  reports  to  the  supervisor,  and  that  with  such  re- 
port each  association  shall  pay  25  cents  for  each  $1,000  of 
assets  shown  by  such  report,  which  payments  go  into  the  state 
treasury  to  make  up  a  fund  known  as  the  "building  and  loan 
supervision  fund."  The  salaries  of  the  supervisor  and  of  his 
examiners  and  employees  and  the  cost  of  maintaining  the  de- 
partment are  paid  out  of  this  fund.  Section  10263  makes  no 
requirement  of  incorporated  building  and  loan  associations. 

Can  the  Missouri  State  League  of  Building  and  Loan  Asso- 
ciations raise  this  question?  It  is  not  a  party  to  this  case,  and 
cannot  be  heard  to  call  in  question  the  constitutionality  of  this 
act  in  an  action  between  other  parties. 

"Laws  enacted  by  the  legislature  are  presumed  to  be  valid, 
and,  even  if  defective  because  violative  of  some  provision  of 
the  state  Constitution,  are  not  void,  although  they  may  in  a 
proper  case  be  voidable;  that  is,  upon  complaint  by  a  party 
whose  rights  are  impaired  by  such  statute.  Upon  this  point 
Cooley  says :  'The  statute  is  assumed  to  be  valid,  until  some 
one  complains  whose  riglits  it  invades.'  'Prima  facie,  and  upon 
the  face  of  the  act  itself,  nothing  will  generally  appear  to  show 
that  the  act  is  not  valid ;  and  it  is  only  when  some  person  at- 


Trusts  Distinguished  from  Other  Organizations.  267 

tempts  to  resist  its  operation,  and  calls  in  the  aid  of  the  judicial 
power  to  pronounce  it  void,  as  to  him,  his  property  or  his 
rights,  that  the  objection  of  unconstitutionality  can  be  presented 
and  sustained.  Respect  of  the  legislature,  therefore,  concurs 
with  well-established  principles  of  law  in  the  conclusion  that 
such  an  act  is  not  void,  but  voidable  only ;  and  it  follows,  as  a 
necessary  legal  inference  from  this  position,  that  this  ground  of 
avoidance  can  be  taken  advantage  of  by  those  only  who  have  a 
right  to  question  the  validity  of  the  act,  and  not  by  strangers."^^ 

We  think  it  is  a  misconception  that  the  statute  grants  to 
relator  a  special  privilege  or  immunity. 

"Such  association  shall  from  time  to  time  furnish  such  surety 
bonds  to  secure  the  faithful  performance  of  their  trust  as  such 
Supervisor  of  building  and  loan  association  shall  reasonably  re- 
quire, and  be  subject  to  his  supervision  and  examination,  sim- 
ilar in  so  far  as  applicable  to  his  supervision  and  examination 
of  building  and  loan  associations." 

It  cannot  be  reasonably  inferred  from  this  that  this  section 
grants  or  contemplates  free  inspection  or  free  service  in  any 
respect.  When  the  statute  requires  supervision  and  examina- 
tion similar  in  so  far  as  applicable  to  the  supervision  of  building 
and  loan  associations,  it  adopts  and  incorporates  the  statute 
referred  to,  so  far  as  applicable,  and  by  necessary  implication 
entitled  the  Supervisor  to  the  fees  appertaining  to  such  service. 
The  laborer  is  worthy  of  his  hire.^* 

It  is  said  that  section  10263,  R.  S.,  violates  section  5  of  ar- 

13  state   ex  rel.   v.   Blake,   241  S.  W.  317;   State  v.  Bixman,  162 

Mo.  100,  loc.  cit.  107,  144  S.  W.  Mo.  1    (3),  62  S.  W.  828. 
1096,  Ann.  Cas.  1913C,  1283.    See,  14  36  Cyc.  1152;  Crohn  v.  K.  C. 

also,   Ex   Parte   Tartar,    278   Mo.  Home  Tel.  Co.,  131  Mo.  App.  313, 

356,    213    S.    W.    94-96;    State   v.  109    S.  W.   1068. 
Bockstruck,  136  Mo.  335   (8),  38 


268  Trusts  for  Business  Purposes. 

tide  12  of  the  Constitution  of  Missouri,  in  that  it  permits  cor- 
porations to  conduct  their  business  in  such  a  manner  as  to  in- 
fringe the  general  well-being  of  the  state.  Section  10263  has 
no  reference  to  corporations.  It  deals  solely  with  unincor- 
porated associations.  But,  aside  from  this,  section  10263  sub- 
jects this  class  of  societies  to  the  wholesome  supervision  and 
examination  of  the  Supervisor  of  Building  and  Loan  Associa- 
tions. It  is  not  seen  that  it  permits  them  to  conduct  their 
business  in  a  manner  to  infringe  on  the  general  well-being  of 
the  state. 

159 — Building   and   Loan   Business  May   be   Conducted   as  a 
Trust  in  Missouri. 

Finally,  it  is  said  that  section  10263,  R.  S.,  permits  lotteries 
in  violation  of  section  10  of  article  14  of  the  Constitution.  It 
authorizes  the  accumulation  of  a  fund  or  funds  for  the  purpose 
of  enabling  the  contributors  to  such  funds  or  their  assigns  to 
secure  loans.  A  simple  reading  of  the  statute  excludes  every 
conception  of  a  lottery.  It  forbids  the  issue  of  a  certificate  au- 
thorizing an  association  to  do  business  if  the  business  is  in 
conflict  with  the  laws  and  Constitution  of  the  state.  Section  i  o 
of  article  14  of  the  Constitution  outlaws  lotteries. 

Criticism  is  made  of  the  plan  for  making  loans;  that  they 
must  be  made  in  the  order  of  their  application.  Any  other 
plan  would  savor  of  favoritism.  Counsel  cites  Silver  v.  In- 
vestment Co.^^  The  facts  in  that  case  show  that  the  scheme 
was  an  unmitigated  gamble,  if  a  scheme  in  which  the  contribu- 
tor will  always  fail  and  the  investment  company  can  never  lose 
may  be  so  characterized.  The  difference  between  that  case  and 
the  case  at  bar  is  the  distance  between  the  poles. 

16  183   Mo.  41,  81   S.  W.   1098. 


Trusts  Distinguished  from  Other  Organizations.  269 

[8>UTH    V.    ANDERSON.] 

There  are  other  suggestions  made  in  the  return;  e.  g.,  that 
the  act  of  1919  (section  10263)  is  void  because  the  title  is 
defective  and  because  it  is  special  and  class  legislation  and  vio- 
lative of  public  policy.  Although  they  are  not  mentioned  in 
the  brief,  we  have  considered  these  suggestions  and  find  no 
merit  in  them.  Courts  cannot  declare  statutes  void  on  the 
ground  that  they  are  against  sound  public  policy  and  morals 
and  hable  to  lead  to  corruption  and  oppression.^^ 

Finding,  as  we  do,  that  the  relators  are  clearly  entitled  to  a 
certificate  authorizing  them  to  do  business  as  an  unincorporated 
association  under  section  10263,  R.  S.  1919,  it  is  ordered  that 
a  peremptory  writ  be  issued  as  prayed. 

All  concur,  except  Elder  and  Woodson,  JJ.,  not  sitting. 

Engeish  Rule. 
160 — In  General. 

The  trust  as  a  business  organization  has  been  and  is  being 
used  quite  extensively  in  England,  as  in  this  country ;  it  has  had 
to  stand  the  test  of  litigation,  and  the  principles  upon  which  it 
is  founded  are  thorouglily  sustained  by  the  courts  of  that  coun- 
try. There  has  been  much  litigation  in  reference  to  the  trust 
problem  in  England,  as  to  whether  it  was  a  partnership,  or  an 
association,  or  whether  it  was  subject  to  their  corporation  act. 
These  questions  were  all  raised  and  involved  in  the  case  of 
Smith  V.  Anderson,^'  and  the  same  rule  of  law  was  laid  down 
there  as  in  this  country  that  a  trust  as  such  has  a  distinct  place 
in  the  law,  separate  and  apart  from  partnerships,  corporations 
and  associations.  Portions  of  the  above  case  have  been  read 
into  a  great  number  of  our  decisions  in  upholding  the  trust  as 

16  8  Cyc.  778.  17  15  Ch,  D.  247. 


270  Trusts  for  Business  Purposes. 

[SMITH    V.    ANDERSON.] 

a  business  organization.  The  logic  and  the  decisiveness  of  the 
opinion  in  this  case  is  of  such  a  nature  as  to  make  it  a  leading 
case,  both  in  England  and  this  country.  Tt  is  of  such  import- 
ance in  the  settlement  of  the  law  in  reference  to  trusts  that  it 
is  reported  herewith  in  substance,  as  follows : 

The  present  action  was  commenced  in  March,  1879,  by  H.  R. 
Smith,  a  holder  of  one  certificate,  on  behalf  of  himself  and  all 
other  holders  of  certificates,  against  the  trustees.  The  state- 
ment of  claim  alleged  tliat  the  defendants  and  the  holders  of 
certificates  were  an  association  of  more  than  twenty  persons, 
formed  after  the  passing  of  the  Companies  Act,  1862,  for  the 
purpose  of  carrying  on  business  that  had  for  its  object  the  ac- 
qviisition  of  gain  by  the  association  or  the  individual  members 
thereof  without  being  registered  as  a  company  under  the  Act, 
or  in  pursuance  of  any  other  Act,  or  of  any  letters  patent ;  and 
that  the  drawing  the  certificates  for  purchase  by  lot  was  a 
lottery  or  a  transaction  of  the  nature  of  a  lottery  and  was  con- 
trary to  law ;  and  that  the  provisions  relating  to  such  drawing 
rendered  the  trust  an  illegal  association.  The  plaintiff  claimed 
to  have  the  funds  distributed  among  the  certificate  holders  in 
proportion  to  the  amounts  subscribed  or  paid  by  them  respec- 
tively for  therr  certificates,  or  otherwise  according  to  their  in- 
terests therein. 

The  action  came  on  for  trial  before  the  Master  of  the  Rolls 
on  the  19th  of  December,  1879. 
Jessel,  M.  R. : — 

This  case  has  been  argued  before  me,  nominally  with  a  view 
to  distinguish  it  from  Sykes  v.  Beadon,^^  but,  of  course,  that  is 
not  the  real  meaning  of  the  argument.  It  is,  as  Mr.  Chitty  told 
me  candidly,  and  I  am  very  glad  of  it,  in  order  that  the  case 

1811  Ch.  D.  170. 


Trusts  Distinguished  from  Other  Organizations.  271 

[SMITH    V.    ANDERSON.] 

may  be  taken  to  the  Court  of  Appeal,  where,  of  course,  the 
decision  of  Sykes  v.  Beadon  itself  will  be  reviewed.  There 
really  are  no  substantial  differences  between  that  case  and  the 
present. 

161 — Meaning  of  the  Word  Business. 

As  regards  the  only  point   which  was  not  elaborately   dis- 
cussed in  Sykes  v.  Beadon,  the  meaning  of  the  word  "business," 
I  must  say  a  few  words.    In  Sykes  v.  Beadon  the  only  point  I 
had  to  consider  was  whether  it  was  an  association  formed  for 
the  purpose  of   gain.     The   supposed  distinction  between  an 
association  formed  for  the  purpose  of  gain  and  an  association 
formed  for  the  purpose  of  taking  upon  itself  a  business  having 
for  its  object  the  purpose  of  gain  was  not  there  argued,  but  it 
has  been  argued  since,  and  I  have  given  an  opinion  upon  it 
which  I  will  repeat.     First,  what  is  the  meaning  of  "any  other 
business"  ?     Now  "business"  itself  is  a  word  of  large  and  in- 
definite import.    I  have  before  me  the  last  edition  of  Johnson's 
Dictionary,  edited  by  Dr.  Latham,  and  there  the  first  meaning 
given  of  it  is,  "Employment,  transaction  of  affairs" ;  the  second, 
"an  affair";  the  third,  "subject  of  business,  affair,  or  object 
which  engages  the  care."    Then  there  are  some  "other  meanings, 
and  the  sixth  is  "something  to  be  transacted."    The  seventh  is, 
"something  required  to  be  done."    Then  taking  the  last  edition 
of  the  Imperial  Dictionary,  which  is  a  very  good  dictionary, 
we  find  it  a  little  more  definite,  but  with  a  remark  which  is 
worth  reading:     "Business,  employment;  that  which  occupies 
the  time  and  attention  and  labour  of  men  for  the  purpose  of 
profit  or  improvement."     That  is  to  say,  anything  which  occu- 
pies the  time  and  attention  and  labour  of  a  m.an  for  the  purpose 
of  profit  is  business.    It  is  a  word  of  extensive  use  and  indefi- 


2/2  Trusts  for  Business  Purposes. 

[SanTH    V.    ANDERSON.] 

nite  signification.  Then,  "Business  is  a  particular  occupation, 
as  agriculture,  trade,  mechanics,  art,  or  profession,  and  when 
used  in  connection  with  particular  employments  it  admits  of 
the  plural  that  is,  businesses."  Therefore  the  Legislature  could 
not  well  have  used  a  larger  word. 

In  addition  to  the  two  dictionaries  I  have  also  looked  at  the 
case  of  Harris  v.  Amery,^^  in  which  forty-six  people  hired  some 
land  to  carry  on  a  farm,  that  is,  they  carried  on  the  farm  be- 
tween them.  A  single  man  carrying  on  a  farm  may  farm  his 
own  land,  but  he  is  carrying  on  a  business.  Sometimes  he  is 
called  a  gentleman  farmer,  but  he  is  still  carrying  on  a  business, 
and,  of  course,  these  forty-six  persons  were  carrying  on  a  busi- 
ness, and  it  was  held  that  it  was  an  illegal  association  under 
this  very  Act  of  Parliament,  because  there  were  m.ore  than 
twenty  of  them.  The  passage  I  am  about  to  read  is  from  the 
judgment  of  that  very  eminent  and  lamented  Judge  Mr.  Justice 
Willes  :20  'Tt  should  seem,  by  the  25  &  26  Vict.  c.  89,  s.  4,  that 
the  Legislature,  viewing  the  frauds  which  had  been  committed 
by  large  companies,  and  the  great  inconvenience  which  was 
found  to  arise  by  reason  of  the  difficulty  of  enforcing  claims 
and  settling  accounts  between  sui-viving  members  and  execu- 
tors of  deceased  members,  and  otherwise,  have  thought  fit  to 
determine  that  no  company,  association,  or  partnership  consist- 
ing of  more  than  twenty  persons,  shall  be  formed  for  the  pur- 
pose of  carrying  on  any  business  that  has  for  its  object  the  ac- 
quisition of  gain  by  the  company  or  its  members,  unless 
registered  under  the  Act.  And  I  think  it  has  done  that  by 
language  which  does  not  admit  of  any  reasonable  doubt.  It  is 
unnecessary  to  refer  to  authorities  to  show  that  'business'  has 
a  more  extensive  signification  than  'trade.'     The  earlier  Bank- 

19  Law  Rep.  1  C.  P.  148.  20  Law  Rep.  1  C.  P.  154. 


Trusts  Distinguished  from  Other  Organizations.  273 

[SMITH    V.    ANDERSON.] 

rupt  Acts  did  not  embrace  farmers :  but  it  was  never  doubted 
that  farming  was  a  'business'  though  not  a  'trade.'  Banking  is 
not  strictly  a  trade.  Where  land  comes  to  a  number  of  persons 
by  operation  of  law,  they  cannot  be  said  to  be  partners,  and 
they  may,  consistently  with  the  Act,  farm  it.  But  when  we 
find  an  association  like  this,  which  is  rendered  illegal  by  an  Act 
of  Parliament,  we  cannot  take  notice  of  the  agreement  under 
which  they  become  tenants,  for  the  purpose  of  establishing  a 
right  in  a  Court  of  law,  or  hold  that  the  occupation  by  one  of 
their  body  is  an  occupation  by  all  the  m.embers  of  the  illegal 
association." 

162 — What  Constitutes  Doing  Business. 

Now,  knowing  what  "business"  means,  is  there  any  distinc- 
tion between  a  person  carrying  on  any  other  business  which  has 
for  its  object  the  acquisition  of  gain,  and  the  words  "formed 
for  the  purpose  of  the  acquisition  of  gain"  ?  It  must  be  a  busi- 
ness to  acquire  gain,  and  really  the  words  add  nothing  to  it. 
"Formed  for  the  purpose  of  gain,"  as  I  put  it  in  Sykes  v. 
Beadon,2i  is  the  same  thing.  You  cannot  acquire  gain  by  means 
of  a  com.pany  except  by  carrying  on  some  business  or  other, 
and  I  have  no  doubt  if  any  one  formed  a  company  or  associa- 
tion for  the  purpose  of  acquiring  gain,  he  must  form  it  for  the 
purjxjse  of  carrying  on  a  business  by  which  gain  is  to  be  ob- 
tained. But  whether  that  be  so  or  not,  I  am  clearly  of  opinion 
that  where  investment  is  made  a  business,  or  where  the  dealing 
in  securities  is  made  a  business,  it  is  a  business  within  the  pur- 
view of  this  Act.  There  are  many  things  which  in  common  col- 
loquial English  would  not  be  called  a  business,  even  when 
carried  on  by  a  single  person,  which  would  be  so  called  when 

8111  Ch.  D.  170. 


274  Trusts  for  Business  Purposes. 

[S:MITH    v.    ANDERSON.] 

carried  on  by  a  number  of  persons.  That  is  a  distinction  not 
to  be  forgotten,  even  if  we  were  trying  the  question  by  the  ordi- 
nary use  of  the  English  language.  For  instance,  a  man  who 
is  the  owner  of  ofifices,  that  is,  of  a  house  divided  into  several 
floors  and  used  for  commercial  purposes,  would  not  be  said  to 
carry  on  a  business  because  he  let  the  offices  as  such ;  but  sup- 
pose a  company  was  formed  for  the  purpose  of  buying  a  build- 
ing, or  leasing  a  house,  to  be  divided  into  offices,  and  to  be  let 
out,  should  not  we  say,  if  that  was  the  object  of  the  company, 
that  the  company  was  carrying  on  business  for  the  purpose  of 
letting  offices,  or  was  an  office-letting  company,  trying  it  by  the 
use  of  ordinary  colloquial  language?  The  same  observation 
may  be  made  as  regards  a  single  individual  buying  or  selling 
land,  with  this  addition,  that  he  may  make  it  a  business,  and 
then  it  is  a  question  of  continuity.  A  man  occasionally  buys 
and  sells  land,  as  many  landowners  do,  and  nobody  would  say 
he  was  a  land-jobber  or  dealer  in  land,  but  if  a  man  made  it 
his  particular  business  to  buy  and  sell  land  to  obtain  profit,  he 
would  be  designated  as  a  land-jobber  or  dealer  in  land. 

When  you  come  to  an  association  or  company  formed  for  a 
purpose,  you  say  at  once  that  it  is  a  business,  because  there  yon 
have  that  from  which  you  would  infer  continuity ;  it  is  formed 
to  do  that  and  nothing  else,  and,  therefore,  at  once  you  would 
say  that  the  company  carried  on  a  business.  So  in  the  ordinary 
case  of  investments,  a  man  who  has  money  to  invest,  invests 
his  money  and  he  may  occasionally  sell  the  investments  and  buy 
others,  but  he  is  not  carrying  on  a  business.  But  when  you 
have  an  association  formed,  or  where  an  individual  makes  it  his 
continuous  occupation — the  business  of  his  life  to  buy  and  sell 
securities — he  is  called  a  stock-jobber  or  share-jobber,  and  no- 
body doubts  for  a  moment  that  he  is  carrying  on  business.  So, 
if  a  company  is  formed  for  doing  the  very  same  thing,  that  is 


Trusts  Distinguished  from  Other  Organizations.  275 

[SJnTH    V.    ANDERSON.] 

for  investing  money  belonging  to  persons  in  the  purchase  of 
stocks  and  shares,  and  changing  them  from  time  to  time, 
either  with  Hmited  or  unhmited  powers,  I  should  say  there  can 
be  no  question  that  they  are  carrying  on  a  business,  whether 
you  call  it  a  business  of  investment  or  a  business  of  dealing  in 
securities,  or,  as  in  the  case  before  me,  both  the  business  of  in- 
vestment and  the  business  of  dealing  in  securities. 


'& 


163 — WJiat  is  Doing  Business  for  Gain. 

Upon  the  other  point,  as  to  this  company  being  formed  for 
the  acquisition  of  gain,  can  there  be  any  doubt  about  it?  The 
prospectus  was  not  stated  in  the  statement  of  claim,  but  it  was 
admitted,  and  Mr.  Chitty  admitted  it  as  if  it  were  stated,  so 
that  it  is  before  the  Court  and  may  properly  be  looked  into,  for 
in  ascertaining  whether  the  association  was  formed  for  that 
purpose,  nothing  can  be  more  important  than  the  prospectus. 
It  is  not  to  be  formed  for  the  purpose,  unless  registered  as  a 
company  under  this  Act,  and  the  prospectus  tells  me  exactly 
what  it  was  formed  for.  The  prospectus  is  as  good,  or  better 
evidence  upon  that  point  than  the  deed,  but,  of  course,  they 
must  both  be  looked  at  to  ascertain  for  what  purpose  the  com- 
pany was  formed.  Was  it  for  the  acquisition  of  gain?  I  have 
discussed  that  question  so  fully  in  so  many  cases,  and  two  of 
them  are  reported.  In  re  Arthur  Average  Association,^^  and 
Sykes  V.  Beadon,^^  that  it  is  not  necessary  for  me  to  say  any- 
thing more  upon  the  view  I  take  of  the  Act.  But  I  must  look 
at  the  prospectus  as  well  as  the  deed  to  see  whether  the  acquisi- 
tion of  gain  is  really  the  purpose  of  the  company.  I  have  no 
doubt  about  it  at  all.  To  my  mind  it  is  as  clear  as  anything 
can  be,  though  it  does  not  follow  that  it  may  not  be  equally 

223   Ch.   D.    522.  23  11  Ch.  D.  170. 


2^6  Trusts  for  Business  Purposi;s. 

[SMITH    V.    ANDERSON.] 

clear  the  other  way  to  some  other  mind  or  minds.  The  pubHc 
are  invited  by  the  prospectus  to  subscribe  their  money  to  buy 
the  shares  of  the  Submarine  Cable  Companies.  They  are  told 
that  they  are  to  buy  them  at  £90  a  certificate.  "The  certificate 
is  to  bear  6  per  cent,  per  annum,  payable  half  yearly,  making 
£6  13s.  4d.  on  the  amount  paid."  That  is  a  very  accurate  cal- 
culation. Therefore,  they  are  to  get  £6  13s.  4d.  upon  surplus 
income  to  the  extent  of  the  available  funds,  by  purchase  in  the 
open  market  or  tender,  or  failing  these  means,  by  yearly  draw- 
ings at  £120.  So  that  a  certificate  holder  is  to  get  a  profit  of 
£30  upon  his  £90  if  he  is  lucky  enough  to  be  a  drawer,  or  if 
they  are  bought  by  tender ;  and  there  is  to  be  "an  equal  rever- 
sionary distribution  of  the  securities  of  the  trust  among  the 
certificate  holders  as  soon  as  the  certificates  have  been  re- 
deemed." Therefore,  over  and  above  £6,  13s.  4d.  per  cent., 
which  is  itself  a  very  handsome  profit,  and  not  the  ordinary 
rate  of  income  derivable  from  investments,  a  certificate  holder 
is  to  get  £30  profit  upon  his  £90,  and  also  the  equal  reversion  in 
distribution  of  the  balance  Avhen  the  certificates  are  all  paid  for. 

Those  are  the  three  first  paragraphs  of  the  prospectus.  It  is 
not  an  ordinary  investment  in  any  sense  of  the  word ;  it  is  a 
speculation  with  a  view  to  a  profit  by  means  of  the  purchase 
of  submarine  Cable  shares,  and  it  would  be  an  abuse  of  the 
term  to  call  this  an  investment,  though  the  purchase  of  specula- 
tive property  in  a  sense,  and  in  a  very  wide  and  lax  sense,  may 
be  termed  an  investment.  Then  after  naming  the  trustees,  I 
come  to  the  next  paragraph,  which  is  a  very  good  illustration  of 
what  kind  of  investments  we  are  dealing  with.  "The  advantage 
of  this  form  of  investment,  by  distributing  the  risk  over  a  num- 
ber of  kindred  undertakings,  and  making  one  insure  the  other, 
is  peculiarly  applicable  to  the  class  of  property  to  be  embraced 
in  this  trust."    That  is,  the  public  are  told  it  is  risky  property. 


Trusts  Distinguished  from  Other  Organizations.  277 

[SMITH    V.    ANDERSON.] 

The  next  sentence  is,  "The  public  has  already  shewn  its  appre- 
ciation of  the  principle  in  the  case  of  Foreign  and  Colonial  Gov- 
ernment Securities,  and  it  is  believed  that  many  would  gladly 
avail  themselves  of  the  high  returns  yielded  by  Telegraph  Cable 
Companies,  if  they  were  relieved  from  the  fear  of  exceptional 
losses  from  accident  or  other  causes  which  would  be  greatly 
lessened  by  such  a  combination."  It  is  no  ordinary  investment, 
the  public  are  afraid  to  touch  it  because  it  is  risky,  but  if  you 
distribute  it  in  the  shape  of  insurance  by  associating  together 
you  will  diminish  your  risk,  and  thereby  get  a  profit. 

The  next  sentence  but  one  shews  that  the  company  was 
formed  for  a  high  rate  of  profit:  "The  trust  will  consist 
solely  of  the  stocks,  shares,  or  debentures  of  submarine  cable 
companies,  which  offer,  apart  from  accidental  interruptions, 
the  prospect  of  a  high  rate  of  profit."  Then  there  is  this  fur- 
ther statement;  "The  selection  and  acceptance  of  the  several 
securities,  the  proportions  in  each  company  to  be  included,  and 
any  purchase  to  be  made,  will  be  determined  and  undertaken 
by  the  trustees  at  their  discretion,  who  will  endeavour  to  secure 
a  fair  average,  having  regard  to  the  ends  in  view."  Then  it  is 
stated  how  the  trustees  are  to  apply  the  funds.  First  they  are 
to  pay  a  limited  amount  of  expenses;  then  to  pay  interest  on 
the  certificates ;  then  there  is  to  be  a  sinking  fund  for  their  re- 
demption ;  then  they  say  how  they  will  be  redeemed.  Then, 
"Power  will  be  reserved  to  the  trustees  to  realize,  at  their  dis- 
cretion, any  securities  belonging  to  the  trust  which  reach  a  pre- 
mium of  30  per  cent,  on  the  purchase  price."  That  is  a  dealing. 
The  trustees  are  not  to  sell  unless  they  get  a  large  profit,  but 
they  are  to  sell  when  they  get  to  30  premium.  Then  it  says : 
"Subject  to  any  special  circumstances  calling  for  an  earlier 
dissolution  under  the  terms  of  the  trust  deed,  it  is  intended  that 
the  trust  should  continue  until  all  the  certificates  have  been  thus 


2/8  Trusts  for  Business  Purposes. 

[SMITH    V.    ANDERSON.] 

redeemed,  when  the  trust  securities  will  remain  for  distribution 
as  a  reversion.  The  trust  will  then  be  wound  up,  and  the  pro- 
ceeds be  distributed  pro  rata  among  the  holders  of  the  coupons 
of  reversion." 

This,  then,  is  the  purpose  for  which  the  company  is  formed. 
The  certificate  holders  are  not  only  to  get  the  profit  I  have 
mentioned,  but  an  ultimate  profit — ^an  ultimate  distribution  of 
the  funds.  That  is  no  ordinary  investment  where  the  property 
is  to  remain  invested ;  on  the  contrary,  all  the  certificates  may  be 
paid  ofif  out  of  income,  it  being  a  very  large  rate  of  profit,  and 
then  the  securities  are  to  be  divided,  the  coupons  giving  the 
right  to  the  reversion.  The  prospectus  further  states :  "A 
person  desirous  of  holding  submarine  cable  shares  can  thus,  by 
means  of  this  trust,  at  a  minimum  of  trouble  and  expense,  di- 
minish the  risk  of  investing  in  any  one  particular  undertaking, 
by  spreading  his  investment  over  a  number  of  dilTerent  under- 
takings, and  reserve  a  portion  of  the  extra  interest  as  a  sinking 
fund  to  pay  off  his  capital;  as  for  each  £ioo  invested  he  virtu- 
ally becomes  a  holder  of  pro  rata  investments  in  some  eight  or 
ten  different  securities,  and  in  addition  receives  a  bonus  when 
his  certificate  is  redeemed,  and  a  pro  rata  participation  in  the 
ultimate  reversion  which  will  remain  when  the  return  of  his 
capital  has  been  accomplished.  The  advantages  are,  ( i )  Inter- 
est at  £6  13s.  4d.  per  cent,  on  the  amount  subscribed.  (2)  Dis- 
tribution of  risk" — not  a  term  that  persons  use  for  ordinary/ 
investments.  (3)  Provision  for  redemption  of  certificates;  if 
by  purchase,  securing  for  his  property  an  enhanced  market 
value,  or,  if  drawn,  a  gain  on  £30  per  certificate.  The  first 
part  which  I  read  used  the  term  "profit,"  now  we  have  the 
term  "gain."  Then,  (4)  A  reversion  eventually  divisible  equal 
to  the  whole  of  his  original  subscription.  It  is  further  stated 
that  a  draft  of  the  trust  deed  may  be  seen.    This  trust  deed  was 


Trusts  Distinguished  from  Other  Organizations.  279 

[SMITH    V.    ANDEBSON.l 

actually  drawn  after  the  investments  were  made,  although  I  do 
not  see  that  that  makes  much  difference  after  having  read  the 
prospectus  to  see  what  the  company  was  formed  for.  Then  it 
is  provided  that  the  trustees  are  to  hold  the  annual  produce  of 
the  investments  in  trust,  "first,  in  payment  of  all  expenses  dur- 
ing the  preceding  year,  but  so  that  the  ordinary  expenses  for 
the  year  1871,  or  in  any  subsequent  year,  include  all  remunera- 
tion to  the  trustees  and  auditors."  They  are  called  trustees, 
but  they  are,  no  doubt,  directors.  They  are,  like  all  directors, 
commercial  trustees,  but  they  are  intended  to  be  paid — not  im- 
properly, because  they  really  are  directors  and  nothing  else. 

There  are  two  or  three  clauses  in  the  deed  which  it  is  neces- 
sary to  read  to  shew  that  there  was  a  dealing  in  shares  by  this 
company,  as  well  as  an  ordinary  investment.  An  association 
for  that  purpose  would,  in  my  opinion,  be  within  the  mischief 
of  the  Act  and  within  the  words  of  the  Act.  It  must  not  be 
supposed  that  I  decide  this  case  simply  on  the  addition  of  the 
dealing  clauses,  but  an  association  for  the  purpose  of  dealing 
would  also  be,  in  my  opinion,  within  the  mischief  of  the  Act 
and  the  words  of  the  Act  also;  consequently,  it  is  as  well  to 
refer  to  them  to  shew  that  it  is  so. 

The  i8th  clause  is  this:  "It  shall  be  lawful  for  the  trustees, 
at  their  discretion,  to  sell  any  of  the  said  scheduled  securities, 
if  and  when  such  security  shall  be  capable  of  being  sold  in  the 
market,  and  shall  be  sold  by  the  trustees  at  a  premium  of  not 
less  than  30  per  cent."  So  that  the  moment  they  rise  to  that 
the  trustees  may  sell  and  take  the  profit,  which  is  to  be  divided 
as  we  shall  see  presently. 

The  19th  section  provides  that  except  when  they  get  the  30 
per  cent,  premium,  none  of  the  scheduled  securities  shall  be 
sold  or  otherwise  converted  into  money,  unless  in  pursuance  of 
a  unanimous  resolution  passed  at  a  meeting  of  the  trustees 


28o  Trusts  for  Business  Purposes. 

[S>UTH    V.    ANDERSON.] 

called  with  express  notice  of  the  object,  at  which  there  are 
present  not  less  than  four  trustees.  Out  of  the  six  managing 
parties  four  must  concur  at  a  meeting  at  which  they  are  present 
to  sell  them,  but  subject  to  that  limitation,  they  have  a  right  to 
sell  without  any  premium  at  all.  Here,  again,  therefore,  there 
is  a  second  power  of  sale  not  referred  to  in  the  prospectus. 
Then  the  produce  is  to  be  applied  as  surplus,  that  is,  in  payment 
of  interest  and  in  payment  for  and  purchasing  of  the  certifi- 
cates. Then  there  is  a  proviso,  "That  it  shall  be  lawful  for 
the  trustees,  if  it  shall  be  so  decided  by  a  unanimous  resolution 
of  the  trustees,  at  a  meeting  called  with  express  notice  of  the 
object,  at  which  all  the  trustees  are  present  in  person  or  by 
proxy,  and  such  resolution  shall  be  confirmed  at  a  meeting  of 
the  certificate  holders  summoned  for  that  purpose  by  advertise- 
ment in  two  London  daily  papers,  to  invest  the  produce  of  any 
such  sale  or  conversion,  or  any  part  of  the  same,  in  the  purchase 
of  such  securities  of  the  same  character  as  the  scheduled  securi- 
ties, as  they  shall  select  for  that  purpose."  So  there  is  a  power 
not  only  to  sell  but  to  repurchase.  I  agree  that,  inasmuch  as  in 
this  large  association — ^and  this  is  admitted  by  the  learned 
counsel  and  has  always  been  intended  to  be  conceded — there  are 
more  than  twenty  persons,  for  I  see  on  the  prospectus  there  is 
not  to  be  a  company  formed  unless  £400,000  is  subscribed,  you 
cannot  get  the  assent  of  every  individual,  but  power  is  given  to 
the  trustees  at  the  general  meeting.  It  is  a  part  of  their  busi- 
ness, therefore,  though  no  doubt  a  primary  object,  but  it  is  an 
object,  to  deal  in  the  securities  in  the  way  I  have  mentioned. 

The  22nd  clause  is  this :  "The  trustees  may  deduct  for  the 
year  1871,  and  in  every  subsequent  year,  by  way  of  remunera- 
tion to  them  for  the  trouble  and  responsibility  undertaken  by 
them,  any  sum  not  exceeding  in  the  aggregate  £1200  per  an- 
num."    So  they  are  paid  trustees,  that  is,  they  are  directors  of 


Trusts  Distinguished  from  Other  Organizations,  281 

[S>IITH    V.    ANDERSON.] 

the  company.  They  are  persons  who  carry  on  the  business  of 
the  company  for  payment,  they  employ  their  time  and  they  are 
paid  for  it.  I  am  not  saying  a  word  against  that;  T  think  it  is 
a  most  rational  thing  that  persons  who  employ  their  time  for 
the  benefit  of  others  should  be  paid,  but  it  shews  their  true 
character,  for  ordinary  trustees  of  a  settlement  are  not  paid. 
Then  it  goes  on :  "The  Trustees  shall,  once  every  year,  by 
advertisement  in  some  two  public  daily  newspapers  published 
in  London,  call  together  a  meeting  of  the  holders  for  the  time 
being  of  the  certificates."  That  is  to  shew  what  the  certificate 
holders  are.  They  are  shareholders  of  the  company  and  nothing 
else.  They  are  called  certificate  holders,  but  it  is  very  clear  that 
they  might  be  called  shareholders.  Many  shareholders,  when 
they  are  paid,  are  paid,  as  we  know,  by  warrants  to  bearer,  and 
that  is  what  these  are.  Nobody  is  to  get  anything  unless  he 
produces  his  certificate.  Then,  "The  proceedings  of  the  said 
meeting  shall,  so  far  as  may  be,  be  conducted  in  the  manner 
prescribed  in  Table  A  to  the  Companies  Act,  1862."  Not  only 
is  it  a  meeting  of  shareholders,  although  the  deed  calls  it  a 
meeting  of  certificate  holders,  but  they  actually  adopt  the  pro- 
visions of  the  Act  for  the  mode  of  conducting  the  business. 
"The  business  of  the  meeting  sliall  be" — that  is  the  other  use 
of  the  word  "business" — "to  receive  and  consider  a  report 
from  the  trustees  on  the  condition  and  affairs  of  the  trust;  to 
appoint  auditors  to  audit  the  accounts  of  the  trustees" — that  is, 
of  the  directors — "and  to  report  to  the  next  meeting  of  the 
holders  of  certificates ;  to  elect  new  trustees."  Again  put  "di- 
rectors," and  you  have  the  ordinary  business  of  a  general 
meeting.  It  is  the  thinnest  possible  disguise.  Then,  "If  it  shall 
be  unanimously  decided  by  the  trustees  at  a  meeting  called  with 
express  notice  of  the  object,  at  which  not  less  tlian  four  trus- 
tees are  present  in  person  or  by  proxy,  tliat  any  extraordinary 


282  Trusts  for  Business  Purposes. 

[SJUTH    T.    ANDERSON.] 

expenses  should  be  incurred,  they  may  incur  the  same  accord- 
ingly, subject  to  the  same  being  confirmed  by  resolution  of  the 
certificate  holders  assembled  at  any  general  meeting."  Then 
there  is  a  provision  in  the  30th  clause:  "If  any  of  the  persons 
parties  hereto" — that  is,  the  trustees — "shall  die  or  become  in- 
capable to  act,  or  sliall  retire  from  the  trusts,  then  and  in  every 
such  case  it  shall  be  lawful  for  the  general  meeting  of  the  cer- 
tificate holders  by  resolution  to  appoint  a  new  trustee  or  new 
trustees  in  the  place  of  the  late  trustee  or  trustees.  That  is 
giving  the  directors  a  lifehold  directorship,  but  it  is  nothing 
more.  Then  the  32nd  clause  empowers  the  general  meeting  of 
certificate  holders  to  require  the  trustees  to  enter  into  a  new 
deed  of  covenant  in  the  same  form  as  this. 

It  does  appear  to  me  that  this  is  as  plain  a  company  or  asso- 
ciation formed  for  the  transaction  of  business  for  the  purpose 
of  gain  as  could  be  put  fairly  into  words,  if  you  change  names 
and  nothing  more.     If  you  call  the  certificate  holders  "share- 
holders," and  call  the  trustees  "Directors,"  and  call  the  associa- 
tion a  "company,"  changing  those  three  names,  you  have  about 
as  simple  a  description  of  an  ordinary  company  under  the  Act 
as  I  think  you  can  well  have.     I  am  satisfied,  as  far  as  I  am 
concerned,  tliat  this  is  not  only  within  the  words  of  the  Act,  but 
is  the  very  thing,  as  explained  by  the  judgment  of  Mr.  Justice 
Willes,  which  the  Act  intended  to  prohibit  for  various  reasons, 
and  that  this  is  a  mere  device,  and  a  very  transparent  one,  to 
endeavour  to  escape  from  the  plain  meaning  of  the  enactment. 
I  should  have  said  that  without  any  possibility  of  hesitation, 
were  it  not  that  I  have  been  told  that  either  this  deed  or  some 
similar  deed  was  settled  in  consultation  by  two  very  great  legal 
luminaries  at  the  Bar.     That  may  be  so,  and  if  it  is  so,  it  will 
only  form  another  instance  among  many  which  have  come  be- 
fore me  shewing  that  where  counsel  are  instructed  to  carry  out 


Trusts  Distinguished  t'rom  Other  Organizations.  283 

[SMITH    V.    ANDEKSOX.] 

an  object  they  do  their  best  to  carry  it  out,  and  the  more  diffi- 
cult it  is  the  more  pains  they  take,  and  then  valuing  their  work, 
not  by  its  real  result,  but  by  the  trouble  it  has  caused  them,  they 
deceive  themselves  into  the  idea  that  they  have  succeeded  in 
evading  an  Act  of  Parliament  and  have  carried  the  purpose 
which  they  have  been  instructed  to  accomplish ;  they  produce 
that  which  satisfies  themselves,  although  it  satisfies  no  judicial 
authority  when  it  comes  to  be  considered  by  a  Court  of  Justice. 


The  judgment  declared  that  the  Submarine  Cables  Trust  was 
an  association  consisting  of  more  than  twenty  persons  formed 
after  the  passing  of  the  Companies  Act,  1862,  for  the  purpose 
of  carrying  on  business  that  had  for  its  object  the  acquisition 
of  gain  by  the  association,  or  by  the  individual  members  thereof, 
without  being  registered  as  a  company  under  the  said  Act,  or 
any  other  Act  of  Parliament,  and  ordered  that  the  affairs  of  the 
association  should  be  wound  up;  with  consequential  inquiries 
and  directions. 

164 — Trust  for  Investment — Distinguished  from  Doing  Busi- 
ness. 

The  Defendants  appealed.  The  appeal  came  on  to  be  heard 
on  the  13th  of  July,  1880. 

Chitty,  Q.  C,  and  Speed,  for  the  Appellants : — 
We  say  that  this  is  not  carrying  on  a  business.  It  is  a  trust 
for  investment ;  the  advantage  being  that  the  trustees  can  invest 
in  a  number  of  different  securities  of  this  class,  so  that  the  risk 
of  loss  by  some  proving  bad  is  diminished,  the  average  being 
good.  Such  an  investment  is  not  a  "business."  That  word  in 
its  widest  sense  includes  all  the  transactions  of  life,  but  that  is 
not  its  meaning  in  the  Companies  Act,  1862.    Again,  if  this  be 


284  Trusts  for  Business  Purposes. 

[SMITH    V.    ANDERSON.] 

a  business,  the  cestuis  que  trust  are  not  associated  for  the  pur- 
pose of  carrying  it  on.  They  meet,  indeed,  but  only  for  very 
limited  purposes — they  cannot  control  the  investments  and  they 
cannot  change  the  trustees  who  have  the  management.  Sup- 
pose a  coal  owner  left  his  colliery  upon  trusts  for  thirty  of  his 
grandchildren,  vesting  the  whole  management  in  the  trustees ; 
the  grandchildren  cannot  be  treated  as  an  association  of  thirty 
persons  within  the  Act ;  the  trustees  are  the  only  persons  carry- 
ing on  the  business,  and  so  they  are  here.  Cox  v.  Hickman^* 
shews  that  the  certificate  holders  are  not  partners.  "Business" 
in  the  Act  means  something  in  the  nature  of  a  trade.  Reg.  v. 
Whitmarsh,^^  under  7  &  8  Vict.  c.  no,  is  in  our  favour  as  to 
this  not  being  a  business.  The  case  of  In  re  Arthur  Average 
Association^®  is  very  different  from  this,  and  the  question 
whether  the  association  was  legal  was  not  finally  decided  by  the 
Court  of  Appeal.  Supposing,  however,  the  decision  of  the 
Master  of  the  Rolls  in  that  case  to  be  upheld,  the  holding  that 
a  mutual  insurance  company  where  the  company  as  a  body 
makes  no  gain  is  within  the  Act  really  does  not  bear  upon  the 
question  whether  a  trust  like  this  is  within  it.  Sykes  v. 
Beadon^'  is  very  similar  to  the  present  case,  but  is  a  recent  de- 
cision of  the  same  Judge,  and  is  in  fact  to  be  treated  as  under 
appeal,  though  in  that  case  the  trusts  more  nearly  resembled 
the  carrying  on  a  business  than  here.  In  the  present  case  the 
object  simply  was  to  invest  in  a  class  of  stocks  paying  a  large 
dividend,  not  to  carry  on  anything  like  stockjobbing  or  specu- 
lating in  shares.  The  pov/ers  of  changing  investments  are  of  a 
very  limited  description,  and  shew  the  intention  that,  except  in 
special  circumstances,  the  original  securities  should  be  retained. 

24  8  H.  L.  C.  268.  26  Law  Rep.  10  Ch.  542. 

''5  15  Q.  B.  600.  27  11  Ch.  D.  170. 


Trusts  Distinguished  from  Other  Organizations,  285 

[SHUTH    V.    ANDERSON.] 

Articles  18,  19,  20,  shew  that  it  was  no  part  of  the  scheme  to 
carry  on  a  business  in  buying  and  selling  shares,  and  the  con- 
duct of  the  trustees  shew  that  this  was  what  was  intended: 
hardly  any  change  has  been  voluntarily  made  in  the  invest- 
ments. 

165 — Company,  Association  and  Partnership  Defined. 

James,  L.  J. : — 

This  case  has  been  very  fully  argued,  and  we  have  had  an 
opportunity  of  considering  it  since  the  time  it  was  first  argued 
before  us.    We,  therefore,  need  not  postpone  our  judgment. 

With  all  deference  to  the  very  clear  opinion  of  the  Master  of 
the  Rolls,  I  cannot  concur  in  the  construction  which  he  has  put 
upon  the  4th  section  of  the  Companies  Act,  1862. 

The  Act  was  intended,  as  it  appears  to  me,  to  prevent  the 
mischief  arising  from  large  trading  undertakings  being  carried 
on  by  large  fluctuating  bodies,  so  tliat  persons  dealing  with 
them  did  not  know  with  whom  they  were  contracting  and  so 
might  be  put  to  great  difficulty  and  expense,  which  was  a  public 
mischief  to  be  repressed.  The  enactment  upon  which  the  ques- 
tion before  us  turns  is  as  follows : — "No  company,  association, 
or  partnership  consisting  of  more  than  twenty  persons  shall  be 
formed  after  the  commencement  of  this  Act  for  the  purpose  of 
carrying  on  any  other  business"  (that  is  to  say,  any  business 
other  than  banking)  "That  has  for  its  object  the  acquisition  of 
gain  by  the  company,  association,  or  partnership,  or  by  the  in- 
dividual members  thereof,  unless  it  is  registered,"  &c.  Now 
there  are  three  words  there,  "company,  association,  or  partner- 
ship." I  cannot  understand  what  the  difference  is  between  a 
company  and  an  association.  The  word  "association,"  in  the 
sense  in  which  it  is  now  commonly  used,  is  etymologically  in- 


286  Trusts  for  Business  Purposes. 

rS>UTH    V.    ANDERSON.] 

accurate,  for  "association"  does  not  properly  describe  the  thing 
formed,  but  properly  and  etymologically  describes  the  act  of 
associating  together,  from  which  act  of  association  there  is 
formed  a  company  or  partnership.  But  I  believe  that  according 
to  the  vernacular  we  use  on  these  subjects  the  difference  which 
the  Act  intended  to  draw  between  a  company  or  association  and 
an  ordinar}^  partnership  is  this:  An  ordinary  partnership  is 
a  partnership  composed  of  definite  individuals  bound  together 
by  contract  between  themselves  to  continue  combined  for  some 
joint  object,  either  during  pleasure  or  during  a  limited  time, 
and  is  essentially  composed  of  the  persons  originally  entering 
into  the  contract  with  one  another.  A  company  or  association 
(which  I  take  to  be  synonymous  terms)  is  the  result  of  an 
arrangement  by  which  parties  intend  to  form  a  partnership 
which  is  constantly  changing,  a  partnership  to-day  consisting 
of  certain  members  and  to-morrow  consisting  of  some  only  of 
those  members  along  with  others  who  have  come  in,  so  that 
there  will  be  a  constant  shifting  of  the  partnership,  a  determina- 
tion of  the  old  and  a  creation  of  a  new  partnership,  and  with 
the  intention  that,  so  far  as  the  partners  can  by  agreement  be- 
tween themselves  bring  about  such  a  result,  the  new  partner- 
ship shall  succeed  to  the  assets  and  liabilities  of  the  old  partner- 
ship. This  object  as  regards  liabilities  could  not  in  point  of 
law  be  attained  by  any  arrangement  between  the  persons  them- 
selves unless  the  persons  contracting  with  them  authorized  the 
change  by  a  novation,  or  unless  by  special  provisions  in  Acts  of 
Parliament  sanction  was  given  to  such  arrangements. 

The  Act  says  that  no  company,  association,  or  partnership 
consisting  of  more  than  twenty  persons  shall  be  formed  after 
the  commencement  of  this  Act.  For  what?  "For  the  purpose 
of  carrying  on  any  business." 


Trusts  Distinguished  from  Othi;r  Organizations.  287 

rSMITH    V.    ANDERSON.] 

166 — Trust  Deed  Docs  not  Constitute  an  Association. 

It  is  contended  that  the  trust  deed  before  us  constitutes  an 
association  of  more  than  twenty  persons  formed  "for  the  pur- 
pose of  carrying  on  business."     I  am  unable  to  agree  with  the 
IMaster  of  the  Rolls  in  the  conclusion  that  it  does.    I  cannot  find 
that  this  deed  constitutes  any  association  whatever  between  the 
persons  who  are  supposed  to  be  socii.    One  man  goes  with  £90 
in  his  hands  and  buys  from  the  trustees  a  iioo  certificate  with 
all  the  chance  of  profit  attaching  to  it.    Another  man  goes  the 
next  day  and  takes  his  £90  to  the  same  people  and  gets  from 
them  another  certificate,  by  which  he  gets  a  right  to  share  in 
the  funds  which  they  have  in  their  hands.    The  first  man  knows 
nothing  of  the  second,  and  the  second  knows  nothing  of  the 
first;  they  have  never  come  into  any  arrangement  whatever  as 
between  themselves.     There  never  lias  been  anything  creating 
any  mutual  rights  or  obligations  between  those  persons.     They 
are  from  the  first  entire  strangers  who  have  entered  into  no 
contract  whatever  with  each  other,  nor  has  either  of  them  en- 
tered into  any  contract  with  the  trustees  or  any  trustee  on  be- 
half of  the  other,  there  being  nothing  in  the  deed  pointing  to 
any  mandate  or  delegation  of  authority  to  anybody  to  act  for 
the  certificate  holders  as  between  themselves,  and  nothing,  as  it 
appears  to  me,  by  which  any  liability  could  ever  be  cast  upon 
the  certificate  holders  either  as  between  themselves  or  as  be- 
tween themselves  and  anybody  else.     Therefore,  I  cannot  ar- 
rive at  the  conclusion  that  the  certificate  holders  form  an  asso- 
ciation within  the  meaning  of  the  Act  of  Parliament,  any  more 
than  the  persons  who  subscribe  for  debentures  in  a  railway,  or 
the  Bolivian  bondholders  (whose  case  was  before  us  in  Wilson 
V.  Church),  or  the  creditors  in  Cox  v.  Hickman.     Persons  who 
have  no  mutual  rights  and  obligations  do  not,  according  to  my 


288  Trusts  for  Business  Purposes. 

[S>aTH    V.    ANDERSON.l 

view,  constitute  an  association  because  they  happen  to  have  a 
common  interest  or  several  interests  in  something  which  is  to  be 
divided  between  them. 

But  supposing  that  the  certificate  holders  do  constitute  an  as- 
sociation, it  appears  to  me  that  it  cannot,  in  any  practical  sense 
of  the  word  ''business,"  in  any  sense  in  which  any  man  of  busi- 
ness would  use  that  word,  be  said  that  the  association  was 
formed  for  the  purpose  of  carrying  on  any  business,  either  by 
themsehes  or  by  any  agent.  I  am  unable  to  conceive  any  state 
of  circumstances  in  which  it  could  be  averred  that  any  contract 
had  been  made  by  or  on  behalf  of  the  body  of  certificate  hold- 
ers, either  by  any  member  of  themselves  or  by  any  other  agent 
or  manager  for  them.  Now,  people  cannot  be  said  to  carry  on 
business  when  it  is  utterly  inconsistent  with  what  they  have 
done  and  with  what  they  have  said,  and  inconsistent  with  the 
nature  of  the  whole  transaction  that  they  should  be  parties 
directly  or  indirectly,  either  by  themselves  or  through  any  agent 
for  them,  to  any  contract,  or  be  liable  for  any  act  of  misfeasance 
or  neglect  of  any  manager,  agent,  or  servant. 

167 — Distinction  befzveen  Trustee  and  Director. 

Again,  if  there  is  any  business  at  all  it  is  to  be  carried  on  by 
the  trustees.  Whatever  is  to  be  done  is  to  be  done  by  the  trus- 
tees. Now,  the  Master  of  the  Rolls  appears,  from  his  judg- 
ment, to  have  considered  that  these  trustees  were,  in  substance 
and  in  lav/,  directors.  With  all  deference  to  the  Master  of  the 
Rolls,  that  appears  to  me  a  fallacy.  To  my  mind  the  distinction 
between  a  director  and  a  trustee  is  an  essential  distinction 
founded  on  the  very  nature  of  things.  A  trustee  is  a  man  who 
is  the  owner  of  the  property  and  deals  with  it  as  principal,  as 
owner,  and  as  master,  subject  only  to  an  equitable  obligation  to 


Trusts  Distinguished  from  Other  Organizations.  289 

[SMITH    T.    ANDERSON.] 

account  to  some  persons  to  whom  he  stands  in  the  relation  of 
trustee,  and  who  are  his  cestuis  que  trust.  The  same  individual 
may  fill  the  office  of  director  and  also  be  a  trustee  having  prop- 
erty, but  that  is  a  rare,  exceptional,  and  casual  circumstance. 
The  office  of  director  is  that  of  a  paid  servant  of  the  company. 
A  director  never  enters  into  a  contract  for  himself,  but  he 
enters  into  contracts  for  his  principal,  that  is,  for  the  company 
of  whom  he  is  a  director  nor  can  he  be  sued  on  them  unless  he 
exceeds  his  authority.  That  seems  to  me  to  be  the  broad  dis- 
tinction between  trustees  and  directors. 

Then,  supposing  that  what  is  to  be  done  here  is  to  be  done  by 
the  trustees,  is  what  the  trustees  are  to  do  under  this  deed  the 
carrying  on  a  business?  In  my  opinion,  nothing  that  is  to  be 
done  under  this  deed  by  the  trustees  comes  within  the  ordinary 
meaning  of  "business,"  any  more  than  what  is  done  by  the 
trustees  of  a  marriage  settlement  who  have  large  properties 
vested  in  them,  and  who  have  very  extensive  powers  of  dispos- 
ing of  the  investments,  changing  the  investments,  and  selling 
them  and  reinvesting  in  other  investments,  according  to  their 
discretion  and  judgment,  with  or  without  the  consent  of  their 
cestuis  que  trust.  That  is  not  a  business.  No  doubt  there  is 
power  in  the  i8th,  19th,  and  20th  clauses  of  this  deed  to  dispose 
of  the  investments  and  reinvest  in  some  similar  securities  with 
the  assent  of  the  certificate  holders.  This  appears  to  me  to  be 
no  more  than  the  power  of  varying  investments  which  you 
would  find  in  an  ordinary  trust  deed,  the  consent  of  some  of 
the  cestuis  que  trust  being  required.  The  deed  appears  to  me 
to  be  merely  a  trust  deed  of  property  for  investment,  the  in- 
vestment being  spread  over  a  number  of  dififerent  securities  so 
as  to  enable  persons  who  choose  to  invest  their  money  in  this 
way  to  avail  themselves  of  that  which  I  believe  is  one  of  the 
most  certain  things  in  the  world,  viz.,  what  is  called  the  doctrine 


290  Trusts  for  Business  Purposes. 

[SJHTH    V.    ANDERSON.] 

of  averages,  that  is  to  say,  tliat  if  a  large  number  of  different 
independent  securities  of  a  hazardous  description  are  held  to- 
gether the  loss  upon  some  will  be  compensated  by  the  gain  on 
the  others,  so  that  a  tolerably  uniform  average  rate  of  interest 
will  be  obtained.  The  object,  and  the  legitimate  object,  of  the 
persons  who  were  invited  to  join  in  this  company  was  to  have 
an  investment  of  their  money  under  such  circumstances  that 
they  might  look  to  have  a  high  dividend  with  a  very  consider- 
able security  for  the  capital  which  they  were  investing  in  it. 
I  can  see  nothing  like  an  attempt  at  evading  the  Act  or  at  doing 
anything  but  making  investments  upon  a  large  scale,  so  as  to 
obtain  the  benefit  of  the  doctrine  of  averages.  Under  those  cir- 
cumstances, I  am  of  the  opinion  that  the  judgment  of  the  Mas- 
ter of  the  Rolls  must  be  discliarged  and  the  action  dismissed. 

168 — Trustees  are  Associated. 

Brett,  L.  J.  :— 

In  this  case  it  becomes  necessary  carefully  to  construe  the  Act 
of  Parliament,  and,  in  so  doing,  we  must  consider  almost  every 
word  and  almost  every  phrase  in  it,  and  we  must  translate,  if 
possible,  into  the  most  accurate  scientific  form  the  idiomatic 
English  which  even  in  an  Act  of  Parliament  is  often  used, 
not  in  its  strictly  grammatical  sense,  but  in  a  business  sense. 

The  4th  section  of  the  Act  is  in  a  negative  form,  and  enacts 
that  no  company,  association,  or  partnership,  consisting  of  more 
than  twenty  persons,  shall  be  formed  for  the  purpose  of  carry- 
ing on  any  business  that  has  for  its  object  the  acquisition  of 
gain,  vniless  it  be  registered.  In  order  to  come  within  this 
clause,  there  must  be  a  joint  relation  of  more  than  twenty  per- 
sons for  a  common  purpose,  which  common  purpose,  as  it  seems 
to  me,  must  be  the  performing  jointly  a  succession  of  acts.    It 


Trusts  Distinguished  from  Other  Organizations.  291 

[SMITH    V.    ANDERSON.] 

will  not  be  sufficient  if  the  relation  exists  for  a  purpose  which 
is  to  be  completed  by  the  performance  of  one  act.  Moreover, 
they  must  be  so  related  together  as  to  form  a  company,  or  a 
partnership,  or  an  association.  I  confess  I  have  some  difficulty 
in  seeing  how  there  could  be  an  association  for  the  purpose  of 
carrying  on  a  business  which  would  be  neither  a  company  nor  a 
partnership,  but  I  should  hesitate  to  say  that,  by  the  ingenuity 
of  men  of  business,  there  might  not  some  day  be  formed  a  rela- 
tion among  twenty  persons  which,  without  being  strictly  either 
a  company  or  a  partnership — might  yet  be  an  association.  But 
according  to  all  ordinary  rules  of  construction,  if  the  associa- 
tion mentioned  in  sect.  4  is  not,  strictly  speaking,  a  company  or 
a  partnership,  it  must  be  something  of  a  similar  kind.  It  must 
be  a  relation  established  between  twenty  persons  or  more  "for 
the  purpose  of  carrying  on  business,"  i.  e.,  in  order  that  such 
company,  association,  or  partnership  may  carry  on  the  business. 
The  business,  therefore,  whatever  the  word  "business"  may 
mean,  is  to  be  carried  on  by  those  twenty  persons  or  more.  The 
expression  "carrying  on"  implies  a  repetition  of  acts,  and  ex- 
cludes the  case  of  an  association  formed  'for  doing  one  particu- 
lar act  which  is  never  to  be  repeated.  That  series  of  acts  is  to 
be  a  series  of  acts  which  constitute  a  business.  Now,  the  word 
"business"  might  in  a  grammatical  sense  include  things  which 
no  ordinary  person  would  call  a  business,  and,  inasmuch  as  the 
Legislature  could  not  particularize  every  kind  of  business 
which  they  intended  to  include,  they  have,  in  order  to  confine 
the  meaning  of  that  large  word  "business,"  stated  that  it  is 
to  be  a  business  "that  has  for  its  object  the  acquisition  of  gain." 
The  association,  then,  must  be  formed  in  order  to  carry  on  a 
series  of  acts  having  the  acquisition  of  gain  for  their  object. 

We  then  come  to  deal  with  the  expression  "gain  by  the  com- 
pany, association,  or  partnership,  or  by  the  individual  members 


292  Trusts  for  Business  Purposes. 

rSMITH    V.    ANDERSON.] 

thereof."  It  seems  to  me  that  that  expression  is  to  be  taken 
distributively,  according  to  the  former  description  of  the  con- 
gregation of  persons.  Where  it  is  a  joint  stock  company,  or  a 
corporation,  or  quasi  corporation,  and  the  individuals  are  mere 
shareholders,  then  the  gain  which  is  acquired  by  the  business  is 
a  gain  by  the  company,  and  not  a  gain  by  the  individual  share- 
holders. But  where  it  is  an  ordinary  partnership,  or  where  it 
is  an  association  which,  not  being  a  joint  stock  company  or  cor- 
poration, is  more  like  to  a  partnership,  there  the  gain  will  be  not 
by  the  whole  body  as  distinct  from  the  individuals,  but  by  the  in- 
dividual partners. 

But  the  mode  in  v/hich  the  gain  when  obtained  is  to  be  dis- 
tributed does  not  seem  to  me  to  be  the  real  point  in  this  case. 
The  real  question  is,  whether  there  is  here  any  association  o[ 
persons  at  all  for  the  purpose  of  carrying  on  a  business  within 
the  meaning  of  this  section,  and  if  so,  then  who  are  those 
persons. 

This  being  my  view  of  the  construction  of  the  statute,  I 
cannot  agree  with  the  statement  of  the  question  by  the  ^Master 
of  the  Rolls  in  v'^ykes  -v.  Beadon  ( i ) .  He  said  that  the  point 
which  he  had  to  consider  was  whether  there  was  an  association 
or  company  formed  for  the  purpose  of  gain  either  by  the  asso- 
ciation or  by  the  individual  members  thereof.  But  he  omitted 
words  which  I  think  were  purposely  put  into  this  statute  for  a 
definite  object,  namely,  that  the  statute  meant  to  deal,  not  with 
people  who  were  associated  together  for  the  purpose  of  obtain- 
ing gain,  but  with  people  who  were  associated  together  for  the 
purpose  of  carr^-ing  on  a  business  having  for  its  object  the 
acquisition  of  gain. 

Let  us  now  consider  whether  in  the  present  case  there  were 
any  persons  associated  for  the  purpose  of  carrying  on  any 
business  such  as  is  described  in  this  clause.    If  there  were  such 


Trusts  Distinguished  from  Other  Organizations.  293 

[SHUTH    V.    ANDERSON.] 

persons,  they  must  have  been  either  the  trustees  or  the  certifi- 
cate holders.  In  my  opinion  neither  the  one  nor  the  other  were 
associated  together  for  the  purpose  of  carrying  on  such  a  busi- 
ness as  is  described  in  the  Act.  I  will  take  first  the  trustees 
themselves.  The  trustees  were  not,  as  I  construe  the  deed,  to 
enter  upon  a  series  of  acts  which,  if  successful,  would  obtain  a 
gain.  They  were  joined  together  for  the  purpose  of  once  for 
all  investing  certain  money  which  was  delivered  into  their 
hands,  and  not  for  the  purpose  of  obtaining  gain  from  a  repeti- 
tion of  investments.  In  other  words,  they  were  not  associated 
together  for  the  purpose  of  speculating  in  shares.  That  was 
not  their  business.  There  was  no  reason  why,  when  they  had 
once  made  an  investment,  it  should,  under  ordinary  circum- 
stances, ever  be  changed.  Therefore,  it  seems  to  me  that  the 
primary  and  substantial  object  of  their  associating  together  was 
not  for  the  purpose  of  carrying  on  a  business  which,  if  success- 
ful, would  result  in  the  acquisition  of  gain.  It  is  true  that, 
under  a  special  state  of  circumstances  which  is  described  in  the 
1 8th  clause,  it  might  be  said  that  then  what  they  would  have 
to  do  under  that  clause  and  clause  20  might  result  in  a  gain. 
But  even  if  a  transaction  under  those  clauses  is  to  be  considered 
as  carried  on  for  the  purpose  of  gain,  which  I  doubt,  yet  that 
is  such  a  merely  subsidiary  part  of  the  transactions  described 
in  the  deed  that  it  cannot  be  said  to  be  a  substantial  part  of 
what  they  have  to  do;  and  if  the  substantial  part  of  what  they 
have  to  do  is  not  a  business,  a  mere  subsidiary  provision  will 
not  bring  them  within  the  Act,  as  was  decided  in  Reg.  v.  Whit- 
marsh^s  and  several  other  cases.  I  am  of  opinion,  therefore, 
that  the  trustees  were  not  associated  for  the  purpose  of  carry- 
ing on  a  business  within  the  meaning  of  the  clause;  and  if  they 

28  15  Q.  B.  600. 


294  Trusts  for  Business  Purposes. 

[SMITH    V.    ANDERSON.] 

were,  they  are  nevertheless  not  within  the  clause  because  they 
are  fewer  than  twenty. 

169 — Certificate  Holders  not  Associated. 

I  now  come  to  the  case  of  the  certificate  holders.  It  seems 
to  me  that  even  if  what  had  to  be  done  under  the  deed  was  to 
be  done  by  them  by  means  of  the  trustees  as  their  accents,  never- 
theless they  were  not  associated  for  the  purpose  of  carrying  on 
such  a  business  as  is  contemplated  by  the  4th  section,  inasmuch 
as  what  was  to  be  done  under  the  deed  did  not  constitute  such 
a  business. 

But  supposing  that  this  was  such  a  business  as  is  mentioned 
in  the  Act,  were  the  certificate  holders  the  persons  who  were  to 
carry  it  on?  It  seems  to  me  that  they  certainly  were  not.  I 
take  it  that  the  persons  called  trustees  in  the  deed  are  clearly 
trustees  as  distinguished  from  agents  and  from  directors.  The 
distinction  has  been  pointed  out  by  my  Lord,  and  I  entirely 
agree  with  it.  If,  indeed,  although  they  were  called  trustees, 
the  duties  which  they  had  to  perform  were  really  those  of  di- 
rectors, then,  although  they  were  called  trustees,  the  legal  effect 
of  the  deed  would  be  that  they  would  be  directors,  and  if  they 
are  directors  they  are  agents;  but  here  it  seems  to  me  clear 
that  according  to  the  true  construction  of  the  deed  they  were 
not  directors  or  agents,  but  trustees.  If  that  be  so,  the  certifi- 
cate holders,  even  if  they  were  associated  at  all,  were  not  asso- 
ciated for  carrying  on  the  business.  It  was  not  their  business. 
They  could  not  have  been  made  liable  for  any  contract  made 
by  the  trustees.  It  was  of  course  urged  that  they  would  be 
liable  as  undisclosed  principals.  But  that  assumes  that  the  per- 
sons who  made  the  contracts  upon  which  they  are  to  be  liable 
are  their  agents  authorized  to  bind  them  by  their  contracts, 


Trusts  Distinguished  from  Other  Organizations.  295 

[S>UTH    V.    ANDERSON.] 

which  is  obviously  not  true.  Therefore,  even  if  there  be  here 
a  business  within  the  meaning  of  the  section,  yet  it  is  not  car- 
ried on  by  the  certificate  holders,  who  are  not  of  the  number  of 
twenty  or  more ;  and,  therefore,  in  either  view  the  case  is  not 
within  the  statute. 

That  being  so,  I  venture  with  great  deference  to  differ  from 
the  Master  of  the  Rolls  in  this  case,  as  also  from  his  decision 
in  Sykes  v.  Beadon.^^  As  regards  the  case  of  the  Arthur  Av- 
erage Association,^''  it  is  not  perhaps  absolutely  necessary  to 
determine  whether  the  case  of  a  mutual  assurance  association 
is  within  the  statute  or  not,  but  I  cannot  help  saying  that  the 
reasoning  which  brings  me  to  the  conclusion  that  the  present 
case  is  not  within  the  statute,  appears  to  me  to  lead  to  the 
same  conclusion  with  regard  to  a  case  of  mutual  assurance.  I 
am  inclined  to  think  that  no  transaction  within  the  association 
or  company  between  the  members  of  it  can  be  taken  into  con- 
sideration in  order  to  determine  whether  the  company  or  asso- 
ciation was  one  formed  to  carry  on  a  business  within  the  mean- 
ing of  this  section. 


'fc> 


170 — ^    Trust  is  Not  Embraced  in   the    Words  Association, 
Company  or  Partnership. 

Cotton,  L.  J. : — 

What  we  have  to  determine  in  this  case  is  whether  there  is  an 
association,  company,  or  partnership  within  the  meaning  of  the 
Act  of  1862.  In  my  opinion  the  question  turns  on  Sect.  4  of 
that  Act.  Sect.  21  has  been  referred  to,  but  I  do  not  think  that 
it  has  any  material  bearing  on  the  question  we  have  to  consider, 
because  the  companies  which  are  referred  to  in  sect.  21  might 
register  under  sect.  6  of  the  Act.     What  we  have  to  consider  is 

29  11  Ch.  D.  170.  30  Law  Rep.  10  Ch.  542. 


296  Trusts  for  Business  Purposes. 

[S>nTH    V.    ANDERSON.] 

not  whether  the  persons  under  this  trust  deed,  as  I  call  it  for 
the  sake  of  shortness,  could  register  under  the  Act,  but  whether 
they  are  bound  to  do  so,  and  in  default  are  an  illegal  association. 
As  Sect.  4  has  been  fully  discussed,  I  will  not  repeat  its 
terms,  but  in  order  to  arrive  at  the  construction  of  the  particular 
portion  of  the  section  upon  which  the  question  turns  it  is  mate- 
rial to  observe  that  it  begins  with  a  restriction  as  to  companies 
carrying  on  a  well-known  business,  the  business  of  banking. 
Then  comes  a  clause  upon  which  the  question  turns,  which  is 
to  apply  to  companies  other  than  banking  companies,  with  cer- 
tain exceptions.     We  have  in  the  first  part,  without  any  refer- 
ence to  gain  or  anything  else,  a  description  of   the  business 
which  companies  in  the  first  part  of  it  are  formed  to  carry  on. 
Then  in  the  second  part  we  liave  a  reference  to  companies  car- 
rying on  any  other  business,  with  this  qualification,  that  the 
business  must  be  one  for  the  acquisition  of  gain  by  the  company, 
association,  or  partnership,  or  by  its  members.     That,  in  my 
opinion,  shews  that  the  words  "for  the  purpose  of  carrying  on 
any  business  which  has  for  its  object  the  acquisition  of  gain" 
are  material,  and  that  the  section  cannot  properly  be  read  as 
saying  "any  other  association  having  for  its  object  the  acquisi- 
tion of  gain."     In  my  opinion  there  must  be  a  company,  asso- 
ciation, or  partnership,  which  is  formed  for  the  purpose  of  car- 
rying on  a  business  by  itself  or  its  agents.     If  it  is   formed 
for  the  purpose,  it  must  register  if  it  is  v.'ithin  the  Act.     Then 
the  nature  of  that  business  is  defined;  it  must  be  a  business 
having  for  its  object  the  acquisition  of  gain  by  the  company 
or  its  members.    I  do  not  think  it  ver>'  material  to  consider  how 
far  the  word  "association"  differs  from  company  or  partner- 
ship, but  I  think  we  may  say  that  if  "association"  is  intended  to 
denote  something  different  from  a  company  or  partnership,  it 
must  be  judged  by  its  two  companions  between  which  it  stands. 


Trusts  Distinguished  from  Other  Organizations.  297 

[SJnTH    V.    ANDERSON.] 

and  it  must  denote  something  where  the  associates  are  in  the 
nature  of  partners.  It  seems  to  me  (not  that  I  think  it  mate- 
rial) that  it  might  have  been  intended  to  hit  the  case  which  we 
have  frequently  seen,  of  a  number  of  persons  or  a  number  of 
firms  joining  themselves  together  for  the  purpose  of  carrying 
on  a  particular  adventure  in  order  to  make  gain  by  it,  as  is 
very  common  where  firms,  one  in  London,  another  in  Liver- 
pool, and  another  in  the  East  Indies,  join  together  in  one  or 
more  adventures,  the  one  to  carry  on  the  one  part  of  the  busi- 
ness, and  the  other  to  carry  on  the  other.  But,  whatever  may 
have  been  the  object  of  using  the  word  "association,"  what  we 
have  to  consider,  in  my  opinion,  is  whether  this  conglomeration, 
as  I  will  call  it,  of  the  persons  who  subscribe  their  money  under 
this  trust  deed,  is  an  association  formed  to  carry  on  any  business 
within  the  meaning  of  this  section  having  for  its  object  the 
acquisition  of  gain. 

But,  before  giving  my  view  as  to  that,  I  will  state  what  I 
consider  to  be  the  effect  of  this  deed.  As  I  understand  it,  this 
is  a  scheme  for  enabling  a  large  sum  of  money  provided  by 
various  persons  to  be  invested  on  a  large  aggregate  of  securities 
of  different  companies  of  a  particular  class,  an  aggregate  in- 
cluding the  securities  of  so  many  companies  as  to  give  a  fair 
average  in  that  particular  class  of  security.  It  is  obvious,  then, 
upon  the  doctrine  of  averages  referred  to  by  Lord  Justice 
James,  that  as  they  are  securities  which  as  a  whole  produce  large 
profits,  though  some  of  them  might  not  produce  profit,  yet  if 
they  were  taken  in  a  large  number  of  companies  there  would  in 
the  result  be  a  large  yearly  sum  to  be  divided  from  the  income 
of  the  aggregate  of  the  investments,  and  when  the  capital  comes 
to  be  divided  the  average  result  will  be  that  the  money  of  the 
contributors  will  be  returned  with  a  profit.  That  was  the  prin- 
ciple of  the  scheme.    The  investments  were  made  in  the  names 


298  Trusts  for  Business  Purpose;s. 

[SMITH    V.    ANDERSON.] 

of  trustees  for  a  lars^er  number  of  contributors.  It  was  neces- 
sary  to  make  provision  for  their  conduct  as  to  how  decisions 
were  to  be  come  to  by  that  body,  as  to  what  was  to  be  done 
with  regard  to  the  general  business  of  the  trust,  and  moreover  it 
was  incident  to  the  trust  that  there  should  be  sometimes  a 
change  of  investment.  That  is  incidental  to  every  trust,  and  is 
provided  for  in  ordinary  trusts,  but  here  we  have  no  doubt  a 
provision  which  at  first  sight  looks  like  carrying  on  a  business. 
Clause  18  provides  that  under  certain  circumstances  the  securi- 
ties may  be  sold,  and  then  by  clause  20  they  may  be  reinvested. 
If  it  appeared  tliat  the  real  object  of  the  deed  was  that  the 
trustees  should  speculate  in  investments,  even  though  confined 
to  this  particular  class,  the  case  would  have  stood  in  a  very 
diflFerent  position.  In  my  opinion  there  is  nothing  in  that  sort. 
This  is  not  a  provision  that  they  shall  make  a  profit  by  selling 
and  buying  again  securities  of  this  class  whenever,  in  their 
opinion,  the  turn  of  the  market  makes  it  advisable  so  to  do. 
The  deed  is  in  substance  a  trust  deed,  providing  how  they  are 
to  hold  as  trustees  specified  securities  of  a  large  amount  with 
provisions  enabling  them  in  certain  events  to  sell  some  of  the 
securities,  and  enabling  them  when  that  is  done,  but  only  under 
special  circumstances,  to  reinvest,  not  to  speculate.  In  my  opin- 
ion that  is  not  a  deed  providing  for  carrying  on  a  business  with- 
in the  meaning  of  the  Act,  it  is  a  deed  providing  for  the  holding 
trust  property,  with  such  provisions  only  as  are  necessary  to 
enable  that  to  be  conveniently  done.  I  am  of  opinion,  therefore, 
that  there  is  no  carrying  on  business  within  the  meaning  of  the 
Act. 

But  supposing  that  there  is  a  business  within  the  meaning  of 
the  Act,  is  there  an  association  of  more  than  twenty  persons 
who  are  carrying  it  on  by  themselves  or  their  agents?  It  was 
argued  by  Mr.  Ince  that  the  mere  fact  of  these  persons  put- 


Trusts  Distinguished  from  Other  Organizations.  299 

[SJHTH    V.    ANDERSON.] 

ting  money,  without  any  contract  or  communication  with  each 
other,  into  a  bank  to  a  common  account  to  be  invested  by  the 
trustees  under  the  trusts  of  this  deed,  made  them  an  association 
carrying  on  business  for  the  purpose  of  gain.    Wliat  I  have  al- 
ready said  as  to  the  true  construction  of  the  4th  section  shews 
that,  in  my  opinion,  that  would  not  be  carrying  on  business. 
They  may  do  it  for  the  purpose  of  profit,  and  most  persons 
when  they  invest  their  money  do  it  for  the  purpose  of  profit, 
that  is  to  say,  they  expect  to  get  a  profit  in  the  shape  of  divi- 
dends, and  probably  also  expect  that  the  investment  will  go 
up  and  will  produce  them  a  profit  when  hereafter  they  may 
wish  to  rea.lize.     But,  in  my  opinion,  what  must  be  shewn  is 
that  the  association  by  themselves  or  by  their  agents  carry  on 
a  business.    Now,  here,  how  can  that  be  said  ?    That  the  certifi- 
cate holders  do  it  by  themselves  can,  I  think,  hardly  be  con- 
tended.    All  the  power  which  the  subscribers  of  this  money 
had  was  to  attend  sometimes  at  meetings,  and  the  meetings 
which  were  held  most  usually  are  those  mentioned  in  clause  26. 
The  only  business  done  at  them  was  to  receive  and  consider  a 
report  from  the  trustees  on  the  condition  and  affairs  of  the 
trust,  to  appoint  auditors  to  audit  the  accounts,  and  to  elect 
new  trustees  to  fill  up  vacancies.    It  is  impossible,  in  my  opin- 
ion, to  say  that  the  certificate  holders  are  by  themselves  in  any 
way  carrying  on  any  business  by  reason  of  what  is  done  at  these 
meetings.     Then  clause  20  says  that  a  reinvestment  must  be 
sanctioned  at  a  meeting  of  the  certificate  holders  summoned  for 
that  purpose.     I  have  already  dealt  with  the  point  that  under 
clauses  18  and  20  there  is  not  a  power  to  speculate  or  to  carry 
on  a  business,  and  really  all  that  is  here  given  to  the  certificate 
holders  is  the  power  to  give  such  assent  as  cestuis  que  trust 
usually  give  for  a  change  of  securities  when  they  are  not  in- 
capacitated by  infancy  or  otherwise.    Of  course  the  number  of 


300  Trusts  for  Business  Purposes. 

[SMITH    V.    ANDERSON.! 

cestuis  que  trust  makes  it  necessary  that  that  should  be  done 
in  some  way  which  will  enable  the  majority  to  bind  the  minor- 
ity, as  otherwise  the  assent  of  the  cestuis  que  trust  could  never 
be  effectually  obtained,  and,  therefore,  a  form  is  adopted  sim- 
ilar to  the  provisions  in  articles  of  association  as  to  meetings  of 
shareholders,  but  that  is  only  matter  of  form.  They  meet  as 
cestuis  que  trust  to  give  their  assent,  not  as  members  of  the 
partnership  joining  to  carry  on  and  control  the  business  of  the 
partnership,  even  if  it  were  a  business. 

Then,  can  it  be  said  that  they  carry  on  a  business  by  their 
agents?  In  my  opinion  that  cannot  be  maintained.  The  trus- 
tees here  are  the  only  persons  who  are  dealing  with  the  invest- 
ments, and  they  are  dealing,  not  as  agents  for  some  principal, 
but  as  trustees  in  whom  the  property  and  the  management  of 
it  are  vested,  and  who  have  the  power  of  changing  the  invest- 
ments and  securities.  Tliat  is  just  like  the  case  which  often 
occurs  where  the  executors  or  trustees  of  a  will  are  directed  to 
carry  on  a  business.  The  fact  that  they  are  to  account  to  others 
for  the  profits  made  is  a  matter  utterly  immaterial  as  between 
them  and  those  with  whom  they  deal.  They  deal  with  those 
persons  as  the  only  persons  contracting,  and  hold  themselves 
out  as  personally  liable.  Those  persons  have  no  right  whatever 
as  against  the  persons  beneficially  entitled,  nor,  except  possibly 
in  the  case  of  a  testator  having  directed  a  part  of  his  assets  to 
be  employed  in  the  trade,  have  they  any  claim  whatever  against 
the  assets  of  the  testator.  Those  dealing  with  executors  so 
carrying  on  a  business  deal  with  them  as  with  any  other  per- 
sons carrying  on  business  and  look  to  no  one  else,  and  even 
although  the  executors  have  a  right  of  indemnity  if  they  act 
properly,  that  in  vo  way  affects  or  enlarges  the  contracts  which 
they  enter  into  with  third  parties.  So  far  as  there  is  any  con- 
tract here  to  be  entered  into  by  the  trustees  it  is  only  a  change 


Trusts  Distinguished  from  Othe;r  Organizations.  301 

[SJnTH    V.    ANDERSON.] 

of  investment ;  so  far  as  there  is  any  business  to  be  carried  on 
it  is  the  business  of  the  trustees,  not  as  agents  for  principals  be- 
hind, but  their  own  business,  that  is  to  say,  a  business  in  which 
they  contract  as  solely  liable  to  outsiders,  whatever  may  be  their 
rights  as  against  those  for  whom  they  are  trustees.  In  my 
opinion,  therefore,  in  this  case  the  only  alleged  association  of 
more  than  twenty,  being  the  persons  who  have  contributed  their 
money,  stand  in  this  position,  that  they  are  not  by  themselves 
or  their  agents  carrying  on  any  business  whatever.  Therefore, 
in  my  opinion,  this  cannot  be  said  to  be  an  association  prohibited 
by  the  Act.  Of  course,  if  the  trustees  are  carrying  on  a  busi- 
ness for  the  purpose  of  profit,  as  they  are  not  twenty  in  number 
there  could  be  no  objection  under  the  Act  to  their  doing  so. 

In  my  opinion  the  view  which  the  Master  of  the  Rolls  took 
of  this  section  of  the  Act  of  Parliament  cannot  be  maintained, 
and  the  action  must  be  dismissed. 


CHAPTER  XV. 
EQUITY. 

171 — Jurisdiction. 

Courts  of  equity  have  jurisdiction  over  all  questions  rela- 
tive to  the  establishment  and  preservation  of  trusts,  and  may 
act  upon  the  application  of  any  one  interested.^^  The  sub- 
ject of  trusts  and  the  control  and  regulation  of  trust  estates 
are  not  properly  cognizable  by  courts  of  law,  but  are  ex- 
clusively within  the  jurisdiction  of  courts  of  equity,^^  for 
courts  of  equity,  independent  of  statute,  have  inherent  and 
exclusive  jurisdiction  over  all  kinds  of  trusts  and  trustees, 
whether  the  trust  arises  by  express  declaration  and  agreement 
or  results  by  implication  of  law.^^  A  court  of  equity  in  its 
jurisdiction  over  trusts  is  not  bound  by  the  technical  rules 
of  the  common  law,  and  will  seek  the  intention  of  the  grantor 
from  the  whole  instrument.^*  For  the  purpose  of  compelling 
an  accounting,  the  existence  of  any  confidential  or  fiduciary 
relation  is  sufficient  to  invoke  the  aid  of  a  chancery  court 
whenever  the  duty  arising  out  of  such  relation  rests  upon  one 
of  the  parties  rendering  an  account  to  the  other.^^  A  court  of 
equity  has  jurisdiction  of  a  bill  to  administer  a  trust  filed 
by  a  beneficiary  in  behalf  of  himself  and  all  other  beneficiaries. 
For  example,  facts  may  be  alleged  which  show  that  the  trus- 

SlHolbrook   v.   Fyffe,    164   Ky.  Ark.  451,  142  S.  W.  848. 

435,  175  S.  W.  977.  34  Buist  v.  Williams,  88  S.  C. 

32  McCoy   V.    McCoy,    30    Okla.  252,  70  S.  E.  817. 

379,  121  Pac.  176.  36  Wilson   v.    Kennedy,    63    W. 

33Spradling  v.  Spradling,  101  Va.  1,  59  S.  E.  736. 

(302) 


Equity.  303 

tee,  although  without  fault  of  his  own,  has  been  prevented 
from  executing  the  trust  in  the  manner  contemplated,  and  that 
there  are  obstacles  in  the  way  of  its  proper  and  economical 
administration  which  the  court  can  remove.^ 

In  a  suit  to  administer  a  trust,  a  court  of  equity  acts  in 
personam ;  and  where  it  has  acquired  full  jurisdiction  of  the 
trustee  and  all  other  necessary  parties,  it  m.ay  direct  the  ad- 
ministration of  the  trust,  although  a  part  of  the  property 
consists  of  land  not  within  its  territorial  jurisdiction.^''  A 
trustee  may  sue  to  impress  the  trust  upon  money  in  the  hands 
of  a  stranger ;  the  bank  in  which  the  stranger  has  deposited 
the  money  is  also  within  the  jurisdiction  of  equity  as  there 
is  no  adequate  remedy  at  law.^^  A  testator  may  leave  cer- 
tain real  estate  in  trust  for  his  children  for  life  and  the  re- 
mainder to  his  grandchildren;  equity  has  original  jurisdic- 
tion to  authorize  the  trustee  to  mortgage  the  interest  of  the 
life  tenants  to  raise  money .^^  A  trust  instrument  may  pro- 
vide that  in  administering  the  trust  the  trustees  shall  use  their 
best  judgment  and  not  be  liable  or  amenable  to  any  court 
or  person  in  the  exercise  thereof ;  but  upon  allegation  of 
fraud  in  the  administration  of  the  trust,  a  court  of  equity 
will  take  jurisdiction  and  investigate  the  manner  in  which 
the  trust  was  administered,  notwithstanding  the  exemption 
of  the  trust  instrument  to  the  contrary.*"  A  court  of  equity 
has  jurisdiction  to  compel  a  trustee  to  pay  funds  into  court 
awaiting    final    disposition,    whether    he   has    misappropriated 

86  Memphis      Sav.      Bank  v.  39  Shirkey   v.   Kirby,    110    Va. 
Houchens,  115  Fed.  96.                         455,  66  S.  E.  40. 

87  Memphis      Sav.      Bank  v.  40  Burch    v.    Gaston,    182    Ala. 
Houchens,  Supra.                                   467,  62  So.  508. 

38  Pennington     v.     Smith,     69 
Fed.  188. 


304  Trusts  for  Business  Purposes. 

the  fund  or  not.*^  Where  trustees  so  disagree  as  to  obstruct 
a  prompt  and  proper  execution  of  a  trust,  or  act  mala  fide  in 
its  execution,  a  court  of  equity  will  interfere  and  compel  them 
to  perform  the  trust,  or  will  itself  execute  it.*^ 

I J 2 — Ju  risdic  Ho  n  R  estricted. 

Where  a  trust  is  discretionary,  equity  has  no  jurisdiction 
to  interfere  with  its  exercise  so  long  as  the  trustee  acts  in 
good  faith  either  in  exercising  or  refusing  to  exercise  the 
power  vested  in  him  ;*^  as  equity  will  not  interfere  with  a 
trustee  in  the  proper  discharge  of  the  duties  of  his  trust.** 
Nor  will  equity  enforce  an  executory  agreement,  made  with- 
out consideration  to  create  a  trust  ;*^  nor  when  trustees  are 
in  existence  and  capable  of  acting,  will  a  court  of  equity 
interfere  to  control  them  in  the  exercise  of  a  discretion  vested 
in  them  by  the  instrument  under  which  they  act.*^ 

173 — Equity  Cannot  Create  a  Trust. 

While  equity  has  jurisdiction  to  control  the  execution  of  a 
trust  created,  and  to  prevent  a  failure  thereof,  and  in  doubt- 
ful cases  to  direct  trustees  as  to  their  duties,*'''  and  may  de- 
clare and  enforce  a  trust,  it  has  no  authority  to  create  a 
trust  or  to  make  a  contract  for  parties  who  do  not  see  fit  to 
make  the  contract  themselves  under  circumstances  where  no 

41  Bullock  V.  Anglemen,  82  N.  45  Central  Trust  Co.  v.  Gaff- 
J.  Eq.  23,  87  Atl.  627.                          ney,  157  App.  Div.  501,  142  N.  Y. 

42  Story    V.    Palmer,    46    N.    J.      Sup.  902. 

Eq.  1,  18  Atl.  363.  46  Nichols  v.   Eaton,   91   U.   S. 

43Glvens     v.     Clem,     107     Va.  R.  717. 

435,  59  S.  E.  413.  47  Morris    v.    Boyd,    110    Ark. 

44  Righter  V.  Riley,  42  W.  Va.  468,  162  S.  W.  69. 
633,  26  S.  E.  357. 


Equity.  305 

trust  could  be  implied  or  result  by  operation  of  law.*^  Where 
a  trust  instrument  expressly  limits  investment  of  the  trust 
funds  to  certain  securities,  it  is  not  within  the  power  of  a 
court  to  change  the  terms  of  the  trust  in  that  particular  by 
approving  unauthorized  investments.*^  Equity  has  no  juris- 
diction to  approve  a  compromise  which  in  effect  would  alter 
the  terms  of  the  trust  instrument.*** 

174 — Trustees  May  Seek  Instructions  From  the  Court. 

A  court  of  chancery  has  general  jurisdiction  of  cases  in 
which  trustees  seek  instruction  from  the  court  in  the  per- 
formance of  their  duties,  because  the  trustees  are  entitled 
to  instruction  and  direction  when  in  doubt.^^  Unless  a  trus- 
tee petitioning  the  court  for  instruction  has  real  and  serious 
doubts  as  to  his  duty,*^  and  the  advice  of  the  court  is  required 
for  the  protection  and  discharge  of  his  trust,  the  court  is 
without  jurisdiction  to  entertain  such  petition. ^^  Where  no 
power  is  given  to  trustees  to  invest,  reinvest  or  change  the 
investment  of  personal  property  held  thereunder,  if  such  course 
is  necessary,  it  is  their  duty  to  apply  for  leave  to  do  so  to 
the  court.**  A  trustee's  right  to  instruction  from  the  court 
does  not  extend  to  the  determination  of  questions  not  requir- 
ing any  action  by  him  or  which  should  properly  be  submitted 

48  Bliss  V.  Bliss,  20  Idaho  467,  Stephenson   v.   Morris,   128   Wis. 
119  Pac.  451.  242,  107  N.  W.  343. 

49  Internatl.      Trust      Co.      v.  62  Crawford  v.  Nies,  224  Mass. 
Preston    (Wye),  156  Pac.  1128.  474,  113  N.  E.  408. 

60  Morris  v.  Boyd,  Supra.  53  Hill  v.   Moors,  Supra. 

61  Hill  V.  Moors,  224  Mass.  163,  54  Branch  v.  DeWolf,  28  R.   I. 
112  N.   E.  641;    Thorp  v.   Lund,       542,  68  Atl.  543. 

227    Mass.    474,    116    N.    E.    946; 


3o6  Trusts  for  Business  Purposes. 

to  some  other  tribunal,  but  is  confined  to  the  discharge  of  bis 
present  duties,  and  instruction  will  not  be  given  where  the 
rights  of  persons  in  ihe  trust  estate  are  contingent  upon  the 
happening  of  events  which  have  not  occurred.^^  The  court 
is  without  jurisdiction  to  entertain  a  bill  in  equity  for  in- 
structions upon  questions  relating  to  the  past  administration 
of  his  trust  ;^^  and  the  rule  seems  to  be  that  the  courts  of  one. 
state  will  not  advise  trustees  as  to  their  duties  in  the  admin- 
istration of  the  trust  concerning  real  estate  located  in  another 
state." 

An  application  by  a  trustee  to  a  court  of  equity  for  direc- 
tion and  guidance  as  to  the  disposition  of  the  trust  funds, 
when  not  made  in  a  suit  then  pending,  should  be  by  bill,  and 
not  by  petition;  and  the  applicant  must  be  in  possession  of 
trust  funds  of  which  disposition  is  necessary  to  be  made 
presently  and  must  show  that  there  are  conflicting  claims, 
or  the  probability  thereof,  and  the  existence  of  no  other 
means  of  determining  rights  or  demands,  so  as  to  protect 
the  trustee  from  the  risks  of  future  liability  or  controversy.^* 
Where  the  entire  control,  management  and  charge  of  realty 
is  committed  to  a  trustee,  primarily  to  administer  it  so  as  to 
produce  by  rentals  the  greatest  practicable  amount  of  new- 
revenue,  and  the  trust  is  to  extend  in  probability  over  a  long 
but  uncertain  term,  the  trustee  may,  by  approval  of  the  court 
having  jurisdiction  of  the  matter,  execute  the  trust  by  creating 
leases  to  continue  beyond  the  life  of  the  trust.^^ 

65Tibbetts  v.   Tomkinson,   208  509,  56  Atl.  773. 
N.   Y.   486,   102  N.   E.   562;    Hill  58  Staplyton  v.  Neeley,  44  Fla. 

V.  Moors,  Supra.  212,  32  So.  868. 

56  Forbes     v.      Brigham,      232  59  Upham    v.    Plankinton,    152 

Mass.  177,  122  N.  E.  396.  Wis.  275,  140  N.  W.  5. 

67  Thayer  v.  Fairchild,  25  R.  I. 


Equity.  307 

175 — May  Remove  Trustees. 

Where  a  just  and  proper  discharge  of  a  trust  or  the  fiducial 
duties  of  the  trustee  are  interfered  with  by  reason  of  hos- 
tiUty  between  the  trustor  and  trustee,  or  a  change  in  trustees 
becomes  advisable  because  the  trust  is  not  being  properly  con- 
ducted, such  change  can  be  made  by  the  court,^''  for  a  court 
of  equity  may  remove  trustees  and  appoint  others  in  their 
stead,  when  required  for  the  preservation  of  the  trust  es- 
tate.^^  The  question  of  the  removal  of  trustees  is  largely 
discretionary  with  the  court,  and  its  exercise  of  this  discretion 
is  not  subject  to  revision  on  appeal,  unless  the  discretion  has 
been  abused.^^  Where  a  trustee  ignores  the  terms  of  the 
trust  deed,  a  court  of  equity  has  jurisdiction  to  remove  him 
and  appoint  a  new  one  at  the  suit  of  the  individual  members 
of  a  committee  appointed  by  the  association  to  look  after 
such  trust,  since  they  may  sue  for  the  benefit  of  all  the 
numerous  beneficiaries.^^ 

The  filing  of  a  bill  by  the  trustee  asking  the  instructions 
of  the  court  as  to  the  execution  of  the  trust  does  not  sus- 
pend the  power  to  remove  him  given  to  the  beneficiaries,  but 
only  subjects  their  action  to  the  supervision  of  the  court.^* 
The  court  will  not  remove  a  trustee  on  the  application  of  a 
co-trustee,  where  the  reasons  for  the  removal  relate  to  the 
management  of  the  trust  estate  involving  judgment  and  dis- 
cretion, where  by  reason  of  business  experience  the  trustee 

€0  Smallwood    v.    Lawson,    183  62  Carrier  v.  Carrier,  226  N.  Y. 

Ky.  189,   208   S.  W.  808.  114,  123  N.  E.  135. 

61  McKenna    v.    O'Connell,    84  63  Guilfoil    v.    Arthur,    158    111. 

Misc.   Rep.    582,   147   N.    Y.    Sup.  '    GOO,  41  N.  E.  1009. 
922.  64  May  v.  May,  17  Sup.  Ct.  Rep. 

824. 


;5o8  Trusts  for  Business  Purposes. 

is  better  qualified  to  act  than  the  co-trustee.^^ 

176 — May  Appoint  Trustees. 

Equity  will  not  sufifer  a  trust  to  fail  because  of  a  vacancy 
in  the  trusteeship,  however  occasioned,  whether  by  death, 
resignation,  or  otherwise,  but  will  substitute  a  trustee  to  exe- 
cute the  trust,  with  or  without  authorization  by  the  instru- 
ment creating  it.^^  The  chancery  court  has  power  to  appoint 
a  trustee  to  administer  a  trust,  where  no  trustee  is  in  exist- 
ence, the  identity  of  trustees  being  a  matter  of  pure  judicial 
discretion,^''^  and  as  the  selection  of  a  trustee  is  in  the  dis- 
cretion of  the  court — though  the  better  practice  requires  the 
court  to  select  a  resident  trustee — there  may  be  circumstances 
justifying  a  departure  therefrom.^^  Ky.  St.  Sec.  318 
(Russell's  St.  Sec.  2301)  providing  that  no  trust  shall  be 
defeated  for  want  of  a  trustee  but  equity  may  uphold  the 
same  by  appointing  trustees,  etc.,  is  but  declaratory  of  the 
rule  of  equity  on  the  subject;  and  where  a  trust  is  once  prop- 
erly created,  the  incompetency,  disability,  or  nonappointment 
of  a  trustee  will  not  defeat  it,  as  equity  will  administer  and 
enforce  the  trust.^^  A  court  of  equity  has  power  under  its 
general  powers,  as  well  as  under  Code  Pub.  Gen.  Laws  1904, 

65Pyle  V.  Pyle,  137  App.  Div.  Estate,  138  Cal.  552,  71  Pac.  707. 

568,  122  N.  Y.  Sup.  256.  67  In  Re  Battin,  89  N.  J,  Eq. 

66  Pollock    V.    House     &    Her-  144,    104    Atl.    434;    Northrip    v. 

mann,  84  W.  Va.  421,  100  S.  E.  Purge,   225   Mo.    641,   164    S.   W. 

275;   Brandon  v.  Carter,  119  Mo.  584. 

572,  24  S.  W.  1035;  Rothenbreger  68  Dodge    v.    Dodge,    109    Md. 

V.  Garrett,  224  Mo.  191,  123  S,  W.  164,  71  Atl.  519. 

574;    Culver    v.    Lompoc    Valley  69  Green's  Adm'rs.  v.  Fidelity 

Sav.  Bank,  22  Cal.  App.  379,  134  Trust  Co.,  134  Ky.  311,  120  S.  W. 

Pac.    355;    Speer   v.    Colbert,    26  283. 
Sup.  Ct.  Rep.  202;    In  re  Gay's 


Equity.  309 

Art.  16,  Sec.  90,  authorizing  the  court  to  appoint  a  trustee 
upon  the  appointed  one  refusing  to  execute  the  trust,  etc.,  to 
appoint  a  testamentary  trustee  on  the  death  of  the  surviving 
trustee  and  on  his  heir  renouncing  the  trust.''^® 

However,  the  chancery  court  is  not  obhged  to  appoint  the 
same  number  of  trustees  provided  for  by  the  trust  instru- 
ment, when  it  appoints  a  trustee  to  administer  the  trust;  the 
number  of  trustees  being  a  matter  of  pure  judicial  discre- 
tion.'^i  Where  a  declaration  of  trust  provides  that  in  case 
of  the  death,  resignation,  or  refusal  to  act  of  either  of  two 
trustees,  a  successor  may  be  appointed  by  the  court  upon 
the  application  of  the  remaining  trustee,  if  the  instrument 
fails  to  provide  any  method  of  appointment  in  case  both  offices 
are  vacant,  trustees  may  then  be  appointed  by  the  court  upon 
the  application  of  cestuis  que  trustent.'^^  Qn  application  of 
trustees  for  appointment  in  place  of  one  deceased,  the  sur- 
vivors expressing  their  desire  to  resign,  a  chancery  court  may 
appoint  a  trust  company  where  parties  in  interest  assent.'^ 
Equity  will  appoint  a  trustee  on  application  of  one  beneficiary 
under  a  trust  deed,  upon  notice  to  the  others,  where  the 
deed  provides  that  in  case  of  a  vacancy  the  beneficiaries  shall 
join  in  appointing  a  trustee,  and  the  feehng  between  the  bene- 
ficiaries is  such  that  they  will  not  so  join.'''* 

70  Dodge  V.  Dodge,  Supra.  73  In  re  Battin,  Supra. 

71  In  re  Battin,  Supra.  74  Cone  v.  Cone,  61  S.  C.  512, 

72  In  re  Borough  of  Kane,  177  39  S.  B.  748. 
Pa.   638,   35   Atl.    874. 


CHAPTER  XVL 
LACHES. 

177 — In  General. 

As  to  what  constitutes  laches  in  a  trust,  no  general  rule  can 
be  stated;  for  the  most  part,  it  depends  upon  the  circum- 
stances in  the  particular  caseJ^  A  person  is  guilty  of  laches 
in  equity  only  when  his  conduct,  negligence,  or  delay  has 
induced  another  to  do  something — or  abstain  from  doing  some- 
thing— whereby  the  latter  would  be  injured  if  the  former 
were  allowed  to  enforce  his  rights,  and  the  doctrine  does 
not  protect  the  fraudulent.'^  Though  laches  will  run  against 
an  express  trust,  courts  of  equity  apply  the  rule  in  such  cases 
less  readily  than  in  cases  of  constructive  trusts ;  and  rarely 
ever  do  so  unless  the  circumstances  disclose  a  defense  in  the 
nature  of  estoppel  such  as  intervention  of  the  rights  of  third 
persons,  loss  of  evidence,  death  of  parties  and  witnesses, 
settlement  or  disavowal  of  the  trust  acquiesced  in  by  the  ces- 
tui que  trust,  or  the  likeJ'  While  generally,  as  between  trus- 
tee and  shareholders,  lapse  of  time  is  not  a  bar  to  the  share- 
holders' action  for  accounting,  yet  where  the  trustee  disclaims 
the  trust  to  the  knowledge  of  the  shareholders  and  remains  in 
unbroken  possession,  lapse  of  time  may  be  relied  upon  as  a 
defense.'*  The  refusal  of  a  trustee  to  execute  a  deed  in 
compliance  with  the  trust  agreement  is  a  repudiation  of  the 

75Rousli  V.  Griffith,  150  N.  C.  77  Roush  v.  Griffith,  Supra. 

820,  65  S.  E.  168.  78  Rouse   v.    Rouse,    Supra,    96 

76  Taber  v.  Bailey,  22  Cal.  App.  S.  E.  986. 
617,  135  Pac.  975. 

(310) 


Laches.  311 

trust,  which,  if  known  to  the  complainants,  opens  the  door  to 
the  defense  of  laches  to  a  suit  to  enforce  the  trust.''^ 

178 — Actions  Barred  by  Laches. 

A  person  entitled  to  impeach  a  fraudulent  transaction  of  a 
trustee  must  do  so  within  a  reasonable  time,  but  what  is  a 
reasonable  time  depends  upon  the  facts  and  circumstances  of 
each  case.^"  The  rule  that  where  trustees  join  in  executing 
a  power  of  sale  and  if  one  receives  the  money,  all  will  be 
responsible,  will  not  be  enforced  where  the  one  receiving  is 
allowed  to  hold  the  money  for  a  number  of  years  with  the 
consent  of  beneficiaries  fully  competent  to  act — no  benefit 
being  derived  therefrom  by  the  others.^^  Where  for  a  num- 
ber of  years  trustees  send  beneficiaries  statements  showing 
a  charge  of  a  certain  commission,  by  failing  to  object  to  such 
commission  and  by  failing  to  apply  for  a  statement  of  ac- 
count to  the  court,  the  beneficiaries  are  estopped  from  object- 
ing thereto  when  the  statement  is  rendered  to  the  court.^^  After 
the  right  to  a  deed  has  accrued  by  reason  of  a  proportionate 
contribution  to  the  work  and  expense  necessary  to  obtain  it. 
a  delay  of  eight  years  will  defeat  a  suit  to  enforce  such  right, 
where  complainants  have  contributed  nothing  further  to  the 
subsequent  development.^^ 

Where  a  petition  against  the  executors  of  a  deceased  trus- 
tee to  secure  an  accounting  of  the  management  and  disposi- 
tion of  a  trust  fund  is  not  filed  until  more  than  five  years  after 

79  Patterson  v.  Hewitt,  25  Sup.  Laurel  Co.  Seminary,  93  Ky.  379, 
Ct.  35.  20  S.  W.  258. 

80  Branch  v.  Bulkley,  109  Va.  82  American  Colon.  Soc.  v. 
784,  65  S.  E.  652.                                    Latrobe,    132    Md.    524,    104    Atl. 

81  Laurel  Co.  Court  v.  Trustees      120. 

83  Patterson  v.  Hewitt,  Supra. 


312  Trusts  for  Business  Purposes. 

the  death  of  the  trustee,  and  more  than  four  years  after  the 
appointment  of  a  substituted  trustee;  or  until  the  final  ac- 
count of  the  executors  of  the  deceased  trustee  has  been  filed 
and  confirmed  and  full  distribution  made  thereunder;  where 
the  trustee's  acts  of  which  complaint  is  made  were  open  to 
inspection ;  and  the  petition  contains  no  explanation  or  excuse 
for  the  delay  in  applying  for  an  accounting,  the  petitioners 
may  be  barred  by  laches.®*  While  the  purchase  by  a  trustee 
of  the  interest  of  his  cestui  que  trustent  is  regarded  with  dis- 
favor, laches  will  bar  the  right  to  relief.®^  If  there  has  been 
no  recognition  of  the  trusteeship  during  a  period  of  twenty 
years  and  the  trust  estate  has  ceased  to  exist,  a  bill  to  require 
an  accounting  by  the  administrator  of  a  trustee  is  barred  by 
laches,  for  the  presumption  is  a  settlement  has  been  made.®^ 

179 — Actions  not  Barred  by  Laches. 

Neither  lapse  of  time,  nor  any  defense  analogous  to  the 
statute  of  limitations,  can  be  set  up  by  the  trustee  of  an 
express  trust  as  a  defense  to  his  ability  to  execute  the  trust ;®' 
and  no  laches  can  be  imputed  to  a  shareholder  for  not  assert- 
ing his  rights  against  the  trustee,  so  long  as  the  former  ac- 
knowledges the  trust  relation.^®  Action  by  the  distributees 
of  a  trust  fund  on  the  trustee's  bond  for  misappropriation  of 
trust  funds  cannot  be  defeated  on  the  ground  of  laches  on  the 
part  of  the  distributees  prior  to  the  termination  of  the  trust, 
since  distributees'  right  to  enforce  distribution  did  not  begin 
until  such  time;  and  the  distributees'  delay  in  bringing  action 

84  O'Malley   v.   Hears,   240   Pa.  Ala.  276,  58  So.  201. 

373,  87  Atl.  862.  87  Preston    v.    Walsh,    10    Fed. 

85McRoberts  V.  Carneal  (Ky.),  315. 

44  S.  W.  442.  88  Reynolds  v.   Sumner    (111.), 

86  Snodgrass  v.  Snodgrass,  176  14  N.  E.  661, 


Laches.  3^3 

on  the  trustee's  bond  to  recover  for  misappropriation  of  the 
trust  funds  is  no  defense,  where  sureties  were  not  preju- 
diced by  such  delay.89  In  an  action  by  the  shareholders  against 
the  trustees  to  recover  the  trust  estate,  laches  in  the  bring- 
ing of  the  suit  cannot  be  imputed  to  the  complainants  until 
they  are  informed  of  some  breach  of  the  trust  or  culpable  neg- 
ligence on  the  part  of  the  trustees  resulting  in  a  loss,  which 
the  latter  refuses  to  make  good.^^  Laches  will  not  become 
an  equitable  bar  to  the  recovery  of  trust  property  by  the  share- 
holders so  long  as  the  trust  relationship  continues.^V  Where 
a  trustee  misappropriates  funds  and  conceals  it  until  the 
time  of  his  removal — the  trust  not  terminating  until  later — 
distributees'  delay  in  bringing  action  on  the  trustee's  bond 
after  the  termination  of  the  trust  is  not,  as  a  matter  of  law, 
prejudicial  delay .^^ 

Where  a  beneficiary,  shortly  after  her  trustee  has  carried 
out  a  fraudulent  transaction  with  her  concerning  her  prop- 
erty, appears  not  to  have  known  that  it  was  of  a  character 
that  she  could  impeach  until  shortly  before  she  sues  to  set 
it  aside;  her  delay  does  not  preclude  relief,  especially  where 
the  trustee  is  still  in  possession  of  the  property  without  any 
material  change  in  it,  and  it  does  not  appear  that  he  has 
been  or  wall  be,  prejudiced  by  the  delay .^* 

1 80 — Estoppel. 

One  of  the  safe-guards  of  the  trustees  in  addition  to  their 
liabilities  being  limited   in  the   trust  agreement   to   the   trust 

89  State  V.  Northrop,  93  Conn.  91  Marshall  v.  Marshall,  11 
558,  106  Atl.  504.  Colo.  App.  505,  53   Pac.  617. 

90  Lindsley  v.   Dodd,   53   N.   J.  92  State  v.  Northrop,  Supra. 
Eq.  69,  30  Atl.  896.  93  Branch  v.  Bulkley,  Supra. 


314  Trusts  for  Business  Purposes. 

[THORN   V.   DE   BRETEUIL.] 

property,  is  that  when  in  doubt  they  can  go  to  a  court  of 
equity  for  instruction  and  guidance.  Once  they  secure  a 
judicial  construction  of  the  trust,  and  act  on  the  advice  of 
the  court,  they  will  be  protected  in  such  action.  This  prin- 
ciple is  well  illustrated  in  Thorn  v.  De  Breteuil.^^  In  this 
case  one  William  T.  Garner,  the  owner  of  cotton  mills  and 
print  works  directed  in  his  will  that  his  mills  and  print  works 
be  conducted  after  his  death  according  to  a  trust  agreement 
which  was  made  a  part  of  his  will.  Originally  there  were 
four  trustees ;  upon  the  death  of  three  of  them,  the  survivor, 
Mr.  Thorn  brought  an  action  as  the  sole  surviving  executor 
and  trustee  under  the  will,  to  obtain  a  judgment  which  should 
finally  settle  his  accounts,  discharge  him  from  all  further 
responsibility,  and  permit  him  to  resign  his  office  of  trust  in 
favor  of  a  certain  trustee  named.  He  joined  as  parties  de- 
fendant the  three  daughters  of  William  T.  Garner,  deceased, 
who  were  his  only  children,  their  husbands,  and  their  chil- 
dren. 

The  principal  question  involved  in  the  case  was  one  of 
estoppel.  The  trustees  at  different  periods  filed  their  reports 
which  were  approved.  At  one  time  prior  to  the  present  ac- 
tion, they  asked  for  a  judicial  construction  of  the  will,  and 
for  instruction  as  to  their  powers  and  duties.  It  was  then 
implied  in  the  judgment  rendered  that  the  trustees  were  to 
carry  on  the  business  in  the  manner  directed  in  the  will; 
further,  that  all  profits  and  gain  not  otherwise  appropriated 
be  added  to  the  working  capital  of  the  estate.  The  question 
of  estoppel  as  it  arose  in  this  case  is  of  vital  interest  in  con- 
sidering the  trust  question  for  the  reason  that  the  trustees 
were  upheld  in  their  acts  when  they  followed  the  instructions 

94  179  N.  Y.  64,  71  N.  E.  470. 


,  Laches.  S^S 

[THORN   V.    IJE   BRETEUIL.l 

of  the  court.  It  was  upon  this  theory  that  the  upper  court 
sustained  the  actions  of  the  trustees  in  adding  the  profits 
gathered  from  years  of  business  to  the  capital — although  this 
addition  of  profits  to  the  capital  was  in  violation  of  a  statute 
against  accumulation.  The  trustees  sought  judicial  knowl- 
edge as  to  their  powers  and  duties ;  they  acted  on  the  instruc- 
tions of  the  court;  the  upper  court  sustained  them  in  such 
action.  The  court,  in  passing  on  the  doctrine  of  estoppel  and 
the  other  questions  raised,  in  substance,  said :  " 

The  well-settled  general  rule  of  estoppel,  as  stated  in  Pray 
V.  Hegeman,^*"  and  as  repeated  more  recently  in  Reich  v. 
Cochran,95  jg  "that  the  estoppel  in  a  former  judgment  extends 
to  every  material  matter  within  the  issues  which  was  ex- 
pressly litigated  and  determined,  and  also  to  those  matters 
which  although  not  expressly  determined  are  comprehended  and 
involved  in  the  thing  expressly  stated  and  decided,  whether 
they  were  or  were  not  actually  litigated  or  considered.  It 
is  not  necessary  to  the  conclusiveness  of  a  former  judgment 
that  issue  should  have  been  taken  upon  the  precise  point  con- 
troverted in  the  second  action.  Whatever  is  necessarily  im- 
plied in  the  former  decision  is,  for  the  purpose  of  the  estoppel, 
deemed  to  have  been  actually  decided."  In  Herman  on  Es- 
toppel,^^  a  general  rule  is  deduced  from  a  number  of  cases 
that  the  principle  of  res  adjudicata,  which  is  a  phase  of  es- 
toppel by  record,  "not  only  embraces  what  actually  was  de- 
termined, but  also  extends  to  every  other  matter  which,  under 
the  issues,  the  parties  might  have  litigated  in  the  case;  to 
everything  within  the  knowledge  of  the  parties  which  might 
have  been   set  up  as  a  ground  of   relief   or  defense.     This 

94*  98  N.  Y.  351.  37  L.  R.  A.  805,  56  Am.  St.  Rep. 

95  151  N.  Y.  122,  45  N.  E.  367,       607. 

96  Sec.  125. 


3i6  Trusts  for  Business  Purpose;s. 

[THORN   V.   DE   BRETEUIL.] 

latter  statement  may  be  thought  rather  broadly  made,  but  it 
is  not  out  of  harmony  with  the  reason  for  the  rule  of  finality 
in  judgments,  namely,  the  policy  and  expediency  of  accom- 
plishing the  ends  of  justice  by  a  single  decision  upon  the 
rights  of  parties.  The  rule  has  also  been  stated,  upon  the 
authorities,  rather  appropriately  to  this  case,  in  this  wise : 
That  the  estoppel  of  a  judgment  by  a  court  of  competent 
jurisdiction  extends  to  those  matters  which,  though  not  ex- 
pressly determined,  are  comprehended  and  involved  in  the 
thing  expressly  stated  and  decided.  Hence  it  is  not  neces- 
sary to  the  conclusiveness  of  the  former  judgment  that  issue 
should  have  been  taken  upon  the  precise  point  controverted  in 
the  second  action."^'' 

Was  not  the  rule  satisfied,  in  its  essential  and  reasonable 
requirements,  in  this  case?  Is  there  room  for  doubt  that  the 
precise  point  now  raised  by  the  daughters  of  the  testator 
was  comprehended  in  what  was  decided  in  the  construction 
suit?  Upon  that  judgment,  in  1879,  the  trustees  have  pro- 
ceeded with  the  business,  accounting  for  the  accumulation  of 
the  surplus  income  of  the  estate  as  part  of  the  capital  in  their 
hands,  and  receiving  the  apparent  approval  of  the  beneficiaries 
and  the  express  approval  of  the  court.  I  do  not  think  the 
ends  of  justice  would  be  promoted  by  allowing  the  claims  of 
the  adult  defendants. 

I  should  say  that  the  point  of  this  estoppel  by  record  is  not 
in  this :  that  an  issue  was  raised  by  way  of  suggestion  in  the 
complaint  or  of  allegation  in  the  answer  in  the  construction 
suit  as  to  the  validity  or  invalidity  of  the  direction  in  the 
second  clause  of  the  will ;  but  it  is  in  this :  that  the  trust 
in   the   will   presented   a   dominating   or   conspicuous    feature 

97  Am.   &  Eng.  Ency.  of  Law,  vol.  24,  p.  766. 


,  Laches.  317 

[THORN   V.   DE   BKETEUIL.] 

in  the  aspect  discussed,  which  the  judgment  in  the  construc- 
tion suit  must  have  determined  or  impHedly  did  determine, 
and  therefore  was  to  be  regarded  as  accepted  by  the  parties 
in  interest  as  the  chart  of  the  trustees'  powers  and  duties. 
The  decision  of  this  court  in  Pray  v.  Hegeman,  supra,  is  an 
authority  much  in  point.  Hegeman  was  executor  and  trus- 
tee under  the  will  of  Austin  D.  Moore,  and  testator's  son, 
a  beneficiary  of  a  trust  created  thereunder,  had  brought  an 
action  against  Hegeman  to  have  the  trust  declared  invalid  as 
unlawfully  suspending  the  power  of  alienation,  and  to  re- 
cover the  share  of  the  estate  and  the  accumulations.  The  judg- 
ment went  against  the  plaintiff,  and  adjudged  the  trust  pro- 
vision to  be  valid.  Whether  the  will  controverted  the  statute 
against  accumulations  was  a  question  not  specifically  raised, 
nor  specifically  passed  upon  by  the  judgment.  That  case 
was  affirmed  in  this  court.^*  Subsequently  Pray,  a  judgment 
creditor  of  the  younger  Moore,  brought  an  action  against 
Hegeman,  the  executor  and  trustee,  and  Moore,  to  reach  the 
accumulation  in  Hegeman's  hands,  as  belonging  to  Moore. 
This  court  held,^^  upon  a  first  trial  that  the  accumulation 
directed  by  the  will  was  illegal;  but,  because  of,  the  im- 
perfect presentation  of  the  facts,  a  new  trial  was  ordered. 
Upon  the  second  trial  a  son  of  Moore,  an  infant,  set  up  as  a 
bar  the  prior  judgment  in  Moore  v.  Hegeman,  and  a  judgment 
was  had  that  the  prior  judgment  pleaded  constituted  an  es- 
toppel. When  the  case  reached  this  court  again,  the  judg- 
ment was  sustained, i**®  and  in  the  opinion  delivered  by  Judge 
Andrews,  the  general  rule  was  stated  as  I  have  quoted  it 
above.  Judge  Andrews  observed  that  "the  first  action  was,  in 
general  terms,  to  recover  the  whole  trust  estate  on  the  ground 

98  72   N.   Y.   376.  100  98  N.  Y.  351. 

99  92  N.  Y.  508. 


3i8  Trusts  for  Business  Purposes. 

[TIIOKN   V.   DE   BRETEUIL.] 

that  the  entire  trust  was  void.  The  present  action  is  to 
recover  the  accumulations  on  the  ground  that  the  trust,  though 
otherwise  valid,  was,  as  to  the  accumulations,  void.  If  the 
plaintiff  in  the  first  action  was  entitled  to  a  judgment  estab- 
lishing his  right  to  the  accumulations,  then  manifestly  this 
action  was  for  the  same  cause.  It  must  be  true,  as  a  general 
principle,  that  subordinate  rights  or  questions  which  are 
branches  of  a  larger  right  or  question  put  in  issue,  and  which 
under  the  pleadings  may  be  determined,  and  as  to  which  re- 
lief may  be  given  in  the  action,  although  the  principal  or 
main  relief  is  denied,  are  determined  by  a  judgment  on  the 
merits  denying  all  relief."  The  principle  of  the  decision  as 
to  the  estoppel  worked  by  the  previous  judgment  was  in 
this :  that  whatever  is  necessarily  implied  in  the  former  de- 
cision is,  for  the  purpose  of  the  estoppel,  deemed  to  have  been 
actually  decided,  and  that  it  is  not  necessary  to  the  con- 
clusiveness of  the  former  judgment  that  issue  should  have 
been  taken  upon  the  precise  point  controverted  in  the  second 
action.  That  was  the  situation  in  this  action.  When  the  exec- 
utors of  Garner  asked  for  a  judicial  construction  of  his  will, 
and  that  their  powers  and  obligations  and  the  rights  of  the 
children  should  be  declared  and  adjudged,  it  was  implied  in 
the  judgment  rendered  that  they  were  authorized  to  carry  on 
the  business  in  the  manner  directed  in  the  will,  and  that  the 
direction  to  add  all  profits  and  gains,  not  otherwise  appro- 
priated, to  the  working  capital  of  his  estate  was  valid. 

To  apply  a  test  suggested  by  Judge  Andrews  in  Pray  v. 
Hegeman,  if  the  defendants  in  the  suit  brought  for  the  con- 
struction of  Garner's  will  had  appealed  from  the  judgment 
and  had  raised  the  point  that  the  direction  as  to  the  addition 
of  profits  to  capital  violated  the  statutes  against  accumula- 
tions,  would   not   the   appellate   courts   have  been  bound  to 


Laches.  3^9 

[THOKN   V,   DE   BKETEUIL.] 

reverse  the  judgment  so  far  as  it  determined  that  the  ex- 
ecutors should  carry  on  the  testator's  business  as  his  will 
directed  it  to  be  done;  there  was  in  fact  such  an  adjudication 
bearing  upon  the  point  now  raised  as  to  have  rendered  the 
judgment  vulnerable  upon  appeal.  But  if  that  be  so,  then  it 
is  no  unreasonable  stretch  to  apply  the  rule  of  estoppel  to 
this  controversy.  It  seems  to  me  that  this  case  is  brought 
well  within  the  line  of  authorities  to  which  counsel  directed 
our  attention,  and  which  determine  the  conclusiveness  of  the 
estoppel  of  a  prior  judgment  by  the  test  of  whether  the  issue 
in  the  subsequent  action  was  involved  upon  the  prior  trial, 
and  was  expressly  or  impHedly  determined  as  material  to  the 
judgment.  When  all  is  considered,  it  seems  to  be  an  irre- 
sistible conclusion  that,  if  the  judgment  of  1879  had  any  ef- 
fect, it  had  that  of  giving  authority  to  the  executors  to  fol- 
low the  testator's  directions.  The  question  stood  plainly  out 
in  the  will  and  in  the  pleadings.  Knowledge  of  the  statutes 
was  chargeable  to  the  court  and  to  the  guardian  of  the  in- 
fant defendants.  The  acts  of  the  plaintiff  and  of  his  former 
associates  in  the  trust  have  not  been  questioned  by  those  con- 
cerned in  all  the  years  intervening  between  the  first  judg- 
ment of  1879,  and  the  commencement  of  this  action  in  1899. 
The  testator's  children,  though  infant  defendants,  were  as 
much  barred  by  the  judgment  in  the  construction  suit  as 
though  they  were  adults.^  These  infant  defendants,  the  grand- 
children of  the  testator,  were  barred  by  that  judgment  equally 
with  their  mothers.  Their  interests  were  purely  contingent 
and  the  court  had  before  it  all  necessary  parties  having  vested 

1  Matter  of  Hawley,  100  N.  Y.      den's  Ex'rs.,  98  N.  Y.  434. 
206,  3  N.  E.   68.     Matter  of  Til- 


320  Trusts  for  Business  Purposes. 

[THORN   V.   DE   BRETEUIL,.] 

interests,  and  through  them  these  infant  defendants  were 
represented.** 

If  the  bar  of  an  estoppel  by  record  existed,  it  will  not  do 
to  lift  it  through  the  suggestion  that  the  accumulations  are 
separable  from  the  capital  of  the  estate  in  the  plaintiff's  hands. 
The  claims  of  these  adult  defendants  were  barred,  or  they 
were  not.  Not  only  the  legal  rule  of  finality  operated,  but 
equitable  considerations  of  possible  prejudice  to  remainder- 
men or  of  possible  prejudice  to  the  investment  of  the  trust 
estate,  militate  against  our  holding  otherwise. 

All  other  questions  have  been  properly  adjudged  and  I 
advise  that  the  judgment  of  the  Appellate  Division  be  reversed 
in  so  far  as  it  modified  the  judgment  of  the  Special  Term, 
and  that  that  judgment  be  affirmed,  with  such  modification, 
however,  in  its  recitals,  as  that  it  shall  adjudge  that  the  adult 
defendants  were  estopped  and  barred  from  claiming  that  the 
provisions  of  the  will  were  invalid,  or  that  the  daughters  of 
the  testator  were  severally  entitled  to  receive  any  portion  of 
the  fund  in  the  plaintiff's  hands  which  represents  the  accumu- 
lations made  by  the  executors  and  trustees. 

2  Pray  v.   Hegeman,   98  N.   Y.      Lef.  386. 
351;    GifEord  v.   Hart,   1   Sch.   & 


CHAPTER  XVII. 
TAXES. 

i8i — Trust  Not  Subject  to  Tax  Under  Corporation  Act. 

The  physical  assets  of  a  trust  are  subject  to  taxation  the 
same  as  any  other  property;  but  the  corporation,  in  addition 
to  this  tax,  is  subject  to  a  capital  stock  tax,  a  franchise  tax, 
and  special  taxes  under  corporate  acts.  It  has  been  said  that 
"in  the  matter  of  taxation  the  advantage  is  decidedly  with 
the  business  trust.  The  corporation  must  pay  an  organization 
tax,  a  property  tax,  a  franchise  tax,  a  state  and  federal  capi- 
tal stock  tax,  and  a  state  and  federal  income  tax."2i  The  trust 
as  such  is  not  subject  to  taxation  under  a  law  providing  for  a 
corporate  tax;  this  doctrine  was  expressed  by  the  United 
States  Supreme  Court  in  the  case  of  Eliot  v.  Freeman.^  In 
this  case  the  Cushing  Real  Estate  Trust  was  organized  for 
the  purpose  of  purchasing,  improving,  holding  and  selling 
lands  and  buildings  in  Boston.  The  government  sought  to 
tax  this  trust  and  another  trust  known  as  the  Department 
Store  Trust  under  an  act  which  provided  for  "the  doing  of 
business  by  corporations,  joint-stock  companies  or  associa- 
tions, now  or  hereafter  organized  under  the  laws  of  the  United 
States  or  of  any  state  or  territory"  In  construing  this  tax 
act  in  reference  to  trusts  the  court  said : 

"The  pertinent  question  in  this  connection  is:     are  these 
trusts  organized  under  the  laws  of  the  state?    As  we  have  con- 

2i  Thompson   Business   Trusts,  8  220    U.    S.    178,    31    Sup.    Ct. 

38.  360,  55  L.  Ed.  424. 

(321) 


322  Trusts  for  Business  Purpos^^s. 

strued  the  corporation  tax  act  in  Flint  v.  Stone  Tracy  Com- 
pany^^-  the  tax  is  imposed  upon  doing  business  in  a  corporate 
or  quasi  corporate  capacity ;  that  is,  with  the  facihty  or  ad- 
vantage of  corporate  organization.  It  was  the  purpose  of  the 
act  to  treat  corporations  and  joint-stock  companies  similarly 
organized,  in  the  same  way,  and  assess  them  upon  the  facility 
in  doing  business  which  is  substantially  the  same  in  both 
forms  of  organization.  Joint-stock  organizations  are  not  in- 
frequently organized  under  the  statute  laws  of  a  state,  deriv- 
ing therefrom,  in  a  large  measure,  the  characteristics  of  a  cor- 
poration. 

The  language  of  the  act,  "now  or  hereafter  organized  under 
the  laws  of  the  United  States,",  etc.,  imports  an  organization 
deriving  power  from  statutory  enactment.  The  statute  does 
not  say  under  the  law  of  the  United  States,  or  a  state,  or 
lawful  in  the  United  States  or  in  any  state,  but  is  made 
applicable  to  such  as  are  organized  under  the  laws  of  the 
United  States,  etc.  The  description  of  the  corporation  or 
joint-stock  association  as  one  organized  under  the  laws  of 
a  state  at  once  suggests  that  they  are  such  as  are  the  creation 
of  statutory  law  from  which  they  derive  their  powers  and 
are  qualified  to  carry  on  their  operations. 

A  trust  of  the  character  of  those  here  involved  can  hardly 
be  said  to  be  organized  within  the  ordinary  meaning  of  that 
term ;  it  certainly  is  not  organized  under  statutory  laws  as 
corporations  are.  The  difference  between  joint-stock  associa- 
tions at  common  law  and  those  organized  under  statutes  is 
well  recognized  (2  Cook,  Corp.  Sec.  505)  :  "There  is  an 
essential  difference  between  a  joint-stock  company  as  it  exists 
at  common  law  and  a  joint-stock  company  having  extensive 

Si  220  U.  S.  107,  55  L.  Ed.  389,    31   Sup.  Ct.  342. 


Taxes.  323 

statutory  powers  conferred  upon  it  by  the  state  within  which 
it  is  organized.  The  latter  kind  of  joint-stock  companies  is 
found  in  England  and  in  the  State  of  New  York.  To  such 
an  extent  have  these  statutory  powers  been  conferred  on 
joint-stock  companies  that  the  only  substantial  difference  be- 
tween them  and  corporations  is  that  the  members  are  not  ex- 
empt from  liability  as  partners  for  the  debts  of  the  company." 

The  two  cases  now  under  consideration  embrace  trusts 
which  do  not  derive  any  benefit  from  and  are  not  organized 
under  the  statutory  laws  of  Massachusetts.  Joint-stock  com- 
panies of  the  statutory  character  are  not  known  to  the  laws 
of  that  commonwealth.*  These  trusts  do  not  have  perpetual 
succession  but  end  with  lives  in  being  and  twenty  years  there- 
after. 

Entertaining  the  view  that  it  was  the  intention  of  congress 
to  embrace  within  the  corporation  tax  statute  only  such  cor- 
porations and  joint-stock  associations  as  are  organized  under 
some  statute,  or  derive  from  that  source  some  quality  or 
benefit  not  existing  at  the  common  law,  we  are  of  the  opin- 
ion that  the  real  estate  trusts  involved  in  these  two  cases  are 
not  within  the  terms  of  the  act.  In  that  view  the  decrees  in 
both  cases  will  be  reversed  and  the  same  remanded  to  the 
Circuit  Court  of  the  United  States  for  the  District  of  Mas- 
sachusetts, with  directions  to  overrule  the  demurrers,  and  for 
further  proceedings  consistent  with  this  opinion." 

182 — Trust  N'ot  Subject  to  Capital  Stock  Tax. 

A  trust  in  its  aggregate  may  be  represented  by  a  certain 
number   of   beneficial    interests,   and    these    interests    may   be 

4  Ricker  v.  American   Loan  &  T.  Co.,  140  Mass.  346,  5  N.  E.  284. 


324  Trusts  for  Business  Purposes. 

[PEOPLE,    ex    rel.    WINCHESTER    v.    COLE3IAN.1 

evidenced  by  transferable  certificates;  where  this  is  true  the 
trust  as  such  is  not  subject  to  a  corporation  act  which  pro- 
vides for  a  capital  stock  tax.  This  principle  is  well  set  forth 
in  the  case  of  The  National  Express  Company  ;*i  in  this  case 
the  express  company — a  joint-stock  association — was  taxed 
on  its  capital  under  an  act  providing  for  a  capital  stock  tax 
on  corporations.  The  company  contended  that  it  was  not 
a  corporation  and  therefore  not  subject  to  a  capital  stock  tax; 
this  view  was  upheld  in  the  lower  and  sustained  by  the  Su- 
preme Court.  The  ruling  on  this  question  is  in  substance  as 
follows : 

The  National  Express  Company  was  taxed  upon  its  capital 
on  the  ground  that  it  had  become  a  corporation  within  the 
meaning  of  the  provision  of  the  Revised  Statutes  which  en- 
acts that  "all  money  or  stock  corporations  deriving  an  income 
or  profit  from  their  capital,  or  otherwise,  shall  be  liable  to 
taxation  on  their  capital  in  the  manner  hereinafter  prescribed. 
(i  Rev.  Stat.  pt.  I,  chap.  13,  title  4,  Section  i.)  The  com- 
pany was  formed  as  a  joint-stock  company  or  association  in 
1853  by  a  written  agreement  of  eight  individuals  with  each 
other,  the  whole  force  and  efifect  of  which,  in  constituting 
and  creating  the  organization,  rested  upon  the  common- 
law  rights  of  the  individuals  and  their  power  to  con- 
tract with  each  other.  The  relation  they  assumed  was 
wholly  the  product  of  their  mutual  agreement  and  depend- 
ent in  no  respect  upon  the  grant  or  authority  of  the  state. 
It  was  entered  into  under  no  statutory  license  or  per- 
mission, neither  accepting,  nor  designed  to  accept,  any  fran- 
chise from  the  sovereign,  but  founded  wholly  upon  the  in- 

4i  People,    ex    rel.    Winchester      E.  96,  16  L.  R.  A.  183. 
V.  Coleman,  133  N.  Y.  279,  31  N. 


Taxes.  325 

[PEOPLE,     ex     rel.     WINCHESTER    v.     COLEMAN.] 

dividual  rights  of  the  associates  to  join  their  capital  and 
enterprise  in  a  relation  similar  to  that  of  a  partnership.  A 
few  years  earlier  the  legislature  had  expHcitly  recognized  the 
existence  and  validity  of  such  organizations  founded  upon 
contract  and  evolved  from  the  common  law  rights  of  citizens ; 
Laws  1849,  Chap.  258.  That  act  provided  that  any  joint-stock 
company  or  association  which  consisted  of  seven  or  more 
members  might  sue  or  be  sued  in  the  name  of  its  president 
or  treasurer,  and  with  the  same  force  and  effect  so  far  as 
the  joint  property  and  rights  were  concerned,  as  if  the  suit 
should  be  prosecuted  in  the  names  of  the  associates ;  but  the 
act  explicitly  disclaimed  any  purpose  of  converting  the  joint- 
stock  associations,  recognized  as  existing,  into  corporations 
by  a  section  prohibiting  any  such  construction;  Section  5. 
In  1 85 1  the  act  was  amended  in  its  form  and  application, 
but  in  no  respect  material  to  the  present  inquiry. 

There  is  no  doubt,  therefore,  that  when  the  company  was 
formed  and  went  into  operation,  the  law  recognized  a  distinct 
and  substantial  difference  between  joint-stock  companies  and 
corporations,  and  never  confused  one  with  the  other;  and 
the  existing  statute  which  taxed  the  capital  of  corporations 
had  no  reference  to  or  operation  upon  joint-stock  companies 
or  associations.  But,  two  things  have  since  occurred.  The 
legislature,  while  steadily  preserving  the  distinction  of  names, 
has,  with  equal  persistence,  confused  the  things  by  obliterat- 
ing substantial  and  characteristic  marks  of  difference,  until  it 
is  now  claimed  that  the  joint-stock  associations  have  grown 
into  and  become  corporations  by  force  of  the  continued  be- 
stowal upon  them  of  corporate  attributes.  It  is  said,  and 
very  probably  correctly  said,  that  the  legislature  may  create 
a  corporation,  without  explicitly  declaring  it  to  be  such,  by 
the  bestowal  of  a  corporate  franchise  or  corporate  attributes, 


326  Trusts  for  Business  Purposes. 

[PEOPLE,     ex    rel.     AAIXCHESTEB    v.     COLEMAN.] 

and  the  cases  of  banking  associations  are  referred  to  as  in- 
stances of  actual  occur rence.5  It  is  added  that  such  result 
may  happen  even  without  the  legislative  intent  and  because 
the  gift  of  corporate  powers  and  attributes  is  tantamount  to 
a  corporate  creation.  It  is  then  asserted  that  a  series  of  stat- 
utes beginning  with  the  act  of  1849,  ^^s  ended  in  the  gift  to 
joint-stock  associations  of  every  essential  attribute  possessed 
by  and  characteristic  of  corporations  (laws  1853,  chap.  53; 
laws  1854,  chap.  245;  laws  1867,  chap.  289);  that  the  lines 
of  distinction  between  the  two,  however,  far  apart  in  the 
beginning,  have  steadily  converged,  until  they  have  melted 
into  each  other  and  become  identical ;  that  every  distinguish- 
ing mark  and  characteristic  has  been  obliterated ;  and  no  rea- 
son remains  why  joint-stock  associations  should  not  be,  in 
all  respects,  treated  and  regarded  as  corporations.  Some  of 
this  contention  is  true ;  the  case  of  People  v.  Wemple^  shows 
very  forcibly  how  almost  the  full  measure  of  corporate  at- 
tributes has,  by  legislative  enactment,  been  bestowed  upon 
joint-stock  associations,  until  the  difference,  if  there  be  one, 
is  obscure,  elusive,  and  difficult  to  see  and  describe.  And 
yet  the  truth  remains  that  all  along  the  line  of  legislation  the 
distinctive  names  have  been  retained  as  indicative  and  repre- 
sentative of  a  difference  in  the  organizations  themselves. 

As  recently  as  the  acts  of  1880  and  1881,  which  formed 
the  subject  of  consideration  in  the  Wemple  case,  the  legis- 
lature, dealing  w^ith  the  subject  of  taxation  and  desiring  to 
tax  business  and  franchises,  imposed  the  liability  upon  "every 
corporation,    joint-stock    company,    or    association    whatever, 

5  Thomas  v.   Dakin,   22  Wend.      Niagara    County,    Supra,    4    Hill 
9;  Bank  of  Watertown  v.  Water-      20. 

town,   25   Wend.    686;    People   v.  6  117  N.  Y.  77,  6  L.  R.  A.  303, 

52  Hun.  434. 


Taxes.  327 

[PEOPLE,    ex     rel.     WINCHESTER    v.     COLEM^VN.] 

now  or  hereafter  incorporated  or  organized  under  any  law  of 
this  state."  It  is  significant  that  the  words  "or  organized" 
were  inserted  by  amendment,  and  evidently  for  the  under- 
stood reason  that  joint-stock  companies  could  not  properly 
be  said  to  be  "incorporated"  but  might  be  correctly  described 
as  "organized"  under  the  laws  of  the  state.  This  persistent 
distinction  in  the  language  of  the  statutes  I  should  not  be  in- 
cHned  to  disregard  or  treat  as  of  no  practical  consequence,  when 
seeking  to  arrive  at  the  true  intent  and  proper  construction  of 
the  statute,  even  if  I  were  unable  to  discover  any  practical  or 
substantial  difference  between  the  two  classes  of  organizations 
upon  which  it  could  rest  or  out  of  which  it  grew;  for  the 
distinction  so  sedulously  and  persistently  observed  would 
strongly  indicate  the  legislative  intent,  and  so  the  correct  con- 
struction. 

But  I  think  there  was  an  original  and  inherent  difference 
between  the  corporate  and  joint-stock  companies  known  to 
our  law,  which  legislation  has  somewhat  obscured  but  has  not 
destroyed,  and  that  difference  is  the  one  pointed  out  by  the 
learned  counsel  for  the  respondent,  and  which  impresses  me 
as  logical,  and  well  supported  by  authority.  It  is  that  the 
creation  of  the  corporation  merges  in  the  artificial  body  and 
drowns  in  it  the  individual  rights  and  liabilities  of  the  mem- 
bers, while  the  organization  of  a  joint-stock  company  leaves 
the  individual  rights  and  liabilities  unimpaired  and  in  full 
force.  The  idea  was  expressed'  by  the  statement  that  the 
corporators  lost  their  individuality  and  merged  their  individ- 
ual characters  into  one  artificial  existence ;  and  upon  these  au- 
thorities a  corporation  is  defined,  on  behalf  of  the  respondents, 

7  Supervisors  of  Niagara  Co.  v.       Livingston,  2  Denio  380. 
People,    7    Hill    512;    Gift'ord    v. 


328  Trusts  for  Business  Purposes. 

IPEOPI.E,    ex    rel.     \\1NCHESTER    v.     COLEMAN.] 

to  be  "an  artificial  person  created  by  the  sovereign  from 
natural  persons  and  in  which  artificial  person  the  natural  per- 
sons of  which  it  is  composed  become  merged  and  nonexistent." 
I  am  conscious  that  legal  definitions  invite  and  provoke  criti- 
cism, because  the  instances  are  rare  in  which  they  prove  to  be 
perfectly  accurate;  and  yet  this  one  offered  to  us  may  be  ac- 
cepted, if  it  successfully  bears  some  sufficient  test.  In  putting 
it  on  trial  we  may  take  the  nature  of  the  individual  liability  of 
the  corporators  on  the  one  hand  and  of  the  associates  on  the 
other  for  the  debts  contracted  by  their  respective  organizations, 
as  a  sufficient  test  of  the  difference  between  them,  and  contrast 
their  nature  and  character.  It  is  an  essential  and  inherent  char- 
acteristic of  a  corporation  that  it  alone  is  primarily  liable  for 
its  debts  because  it  alone  contracts  them,  except  as  that  natural 
and  necessary  consequence  of  its  creation  is  modified  in  the  act 
of  its  creation  by  some  explicit  command  of  the  statute  which 
either  imposes  an  express  liability  upon  the  corporators  in  the 
nature  of  a  penalty  or  affirmatively  retains  and  presences  wlrnt 
would  have  been  the  common  law  liability  of  the  members  from 
the  destruction  involved  in  the  corporate  creation.  In  other 
words,  the  individual  liability  of  the  members,  as  it  would  have 
existed  at  common  law,  is  lost  by  their  creation  into  a  corpora- 
tion, and  exists  thereafter  only  by  force  of  the  statute  upon 
some  new  and  modifying  conditions,  to  some  partial  or  changed 
extent,  and  so  far  preventing  by  the  intervention  of  an  express 
command  the  total  destruction  of  individual  liabilities  which 
otherwise  would  flow  from  the  inherent  effect  of  the  corporate 
creation.  The  penalties  sometimes  imposed  are  of  course  new 
statutory  liabilities  which  never,  at  common  law,  rested  upon 
the  individual  members.  The  retained  liability  occasionally  es- 
tablished is  in  the  nature  and  a  parcel  of  such  original  liability^ 

8  Rogert  V.  Decker,  131  N.  Y.  490. 


Taxes.  329 

[PEOPLE,    ex    rel.     WINCHESTER    v.     COLEMAN.] 

but  is  retained  by  force  of  the  express  command  of  the  statute, 
and  in  that  manner  saved  from  the  destruction  which  otherwise 
would  follow  the  simple  creation  of  the  corporation. 

Ordinarily  these  individual  liabilities  exist  upon  other  than 
common-law  conditions,  and  make  the  corporators  rather  sure- 
ties or  guarantors  of  the  corporation  than  original  debtors, 
since  in  general  their  ability  arises  after  the  usual  remedies 
against  the  corporation  have  been  exhausted.  But,  where  that 
is  not  so,  the  invariable  truth  is  that  the  creation  of  the  corpora- 
tion necessarily  destroys  the  common-law  liability  of  the  in- 
dividual members  for  its  debts,  and  requires  at  the  hands  of  the 
creating  power  an  affirmative  imposition  of  new  personal  lia- 
bilities, or  a  specific  retention  of  old  ones  from  the  destruction 
which  would  otherwise  follow.  Exactly  the  opposite  is  true 
of  joint-stock  companies.  Their  formation  destroys  no  part 
or  portion  of  their  common-law  liability  for  the  debts  con- 
tracted. Those  debts  are  their  debts,  for  which  they  must 
answer,  permission  to  sue  their  president  or  treasurer  is  oiily 
a  convenient  mode  of  enforcing  that  liability  but  in  no  manner 
creates  or  saves  it.  The  statute  of  1853  did  interfere  with  it; 
that  act  required,  in  the  first  instance,  a  suit  against  the  presi- 
dent or  treasurer,  and  so  a  preliminary  exhaustion  of  the  joint 
property.  But  that  act  was  modal,  and  determined  the  pro- 
cedure, it  suspended  the  common-law  right,  but  recognized  its 
existence.  It  has  been  held  that  the  associations  were  not  cor- 
porations, but  mere  partnership  concerns.^  Even  that  mode  or 
procedure  has  been  modified  by  the  Code,  (Sees.  1922,  1923) 
so  that  the  creditor,  at  his  option,  may  sue  the  associates  with- 
out first  bringing  his  action  against  the  president  or  treasurer. 

These  last  and  quite  recent  enactments  show  that  the  legis- 
SWitherhead  v.  Allen,  4  Abb.  App.  Dec.  628. 


330  Trusts  for  Business  Purposes. 

[PEOPLE,     ex    rel.     A\aNCHESTER     v.     COLEJIAN.] 

lative  intent  is  still  to  preserve  and  not  destroy  the  original  dif- 
ference between  the  two  classes  of  organizations ;  to  maintain 
in  full  force  the  common-law  liability  of  associates,  and  not  to 
substitute  for  it  that  of  corporators;  and,  preserving  in  con- 
tinued operation  that  normal  and  distinctive  difference,  to  evince 
a  plain  purpose  not  to  merge  the  two  organizations  in  one,  or 
destroy  the  boundaries  which  separate  them.  That  intent,  once 
clearly  ascertained,  determines  the  construction  to  be  adopted, 
and  may  be  the  only  reliable  test  in  view  of  the  power  of  the 
state  to  clothe  one  organization  with  all  the  attributes  of  the 
other.  The  drift  of  legislation  has  been  to  lessen  and  obscure 
the  original  and  characteristic  difference.  On  the  one  hand, 
corporations  have  been  created  with  positive  provisions  retain- 
ing more  or  less  the  individual  liability  of  the  members,  and  on 
the  other,  the  joint-stock  company  has  been  clothed  with  most 
of  the  corporate  attributes;  but  enough  of  the  original  differ- 
ence remains  to  show  that  our  legislation  not  only  carefully  pre- 
serves the  distinction  of  names,  but  sufficient,  also,  of  the  orig- 
inal difference  of  character  and  quality  to  disclose  a  clear  intent 
not  to  merge  the  two.  We  may  thus  see  upon  what  the  legis- 
lative intent  to  preserve  them  as  separate  and  distinct  is 
founded,  and  what  distinguishing  characteristics  remain.  The 
formation  of  the  one  involves  the  merging  and  destruction  of 
the  common-law  liability  of  the  members  for  the  debts,  and 
requires  the  substitution  of  a  new,  or  retention  of  the  old,  lia- 
bility by  an  affirmative  enactment  which  avoids  the  inherent 
effect  of  the  corporate  creation ;  in  the  other  the  common-law  lia- 
bility remains  unchanged  and  unimpaired  and  needing  no  statu- 
tory intervention  to  preserve  or  restore  it.  The  debt  of  the 
corporation  is  its  own  debt,  and  not  that  of  its  members;  the 
debt  of  the  joint-stock  company  is  the  debt  of  the  associates, 
however  enforced.    The  creation  of  the  corporation  merges  and 


Taxes.  331 

[PEOPLE,     ex    rel.     WINCHESTER     v.     COLEMAN.] 

drowns  the  liability  of  its  corporators ;  the  creation  of  the  stock 
company  leaves  unharmed  and  unchanged  the  liability  of  the 
associates.  The  one  derives  its  existence  from  the  contract  of 
the  individuals;  the  other,  from  the  sovereignty  of  the  state. 
The  two  are  alike,  but  not  the  same.  More  or  less  they  crowd 
upon  and  overlap  each  other,  but  without  losing  their  identity ; 
and  so,  while  we  cannot  say  that  the  joint-stock  company  is  a 
corporation,  we  can  say  that  a  joint-stock  company  is  a  partner- 
ship with  some  of  the  powers  of  a  corporation.^"  Beyond  that 
we  do  not  think  it  is  our  duty  to  go. 

183 — Trust  Not  Subject  to  franchise  Tax. 

The  corporation  comes  into  being  and  operates  by  reason  of 
a  franchise  granted  by  the  state ;  the  trust,  however,  comes  into 
existence  as  a  matter  of  right  under  contract  of  individuals.  It 
neither  exercises  nor  enjoys  any  franchise  or  special  privilege 
from  the  state  and  for  that  reason  there  is  no  basis  for  a  fran- 
chise tax  being  assessed  against  it.  This  principle  is  discussed 
and  amplified  in  the  case  of  Gleason  v.  McKay.^^  This  case  is 
recognized  as  a  leading  one  on  this  subject,  it  has  been  cited 
and  the  doctrine  expressed  therein  read  into  the  decisions  in  a 
great  number  of  states.  It  is  reported  herewith  in  substance  as 
follows : 

This  was  an  action  by  the  treasurer  of  the  Commonwealth 
against  the  trustee  of  the  McKay  Sewing  Machine  Association, 
to  recover  a  tax  assessed  upon  said  association  for  the  year 
1879,  in  pursuance  of  the  St.  of  1878,  c.  275.  The  case  was 
submitted  to  the  Superior  Court,  and,  after  judgment  for  the 
defendant,  to  this  court  on  appeal  on  agreed  facts.     Previous 

10  Van    Aernam    v.     Bleistein,  11  134  Mass.  419. 

102  N.  Y.  470,  4  Cent.  Rep.  635. 


332  Trusts  for  Business  Purposes. 

to  May  lo,  i856,  Gordon  McKay  had  acquired,  by  invention, 
assignment  or  license,  interests  in  letters  patent  of  the  United 
States  for  improvements  in  machinery  for  sewing  the  soles  of 
boots  and  shoes  to  the  vamps,  and  had  been  carrying  on  the 
business  of  manufacturing  machines  under  these  letters  patent, 
and  licensing  shoe  manufacturers  to  use  them.  From  the  pro- 
ceeds of  the  business,  he  had  purchased  land  in  Lawrence  and 
built  a  machine  shop  on  it  for  the  manufacture  of  such  machines 
and  accumulated  some  personal  property.  The  legal  title  in 
the  business  and  in  all  the  property,  both  real  and  personal,  in- 
cluding the  interests  in  the  letters  patent,  was  in  himself ;  but 
other  persons  were  equitably  interested  in  various  proportions. 
On  May  lo,  1866,  McKay  executed  an  instrument  under 
seal,  in  which,  after  reciting  the  foregoing  facts,  he  declared 
that  he  had  held  and  should  continue  to  hold  the  business  and 
property  in  trust  for  the  benefit  of  all  persons  who  were  or 
might  become  interested  therein,  upon  the  terms  and  conditions 
therein  set  forth.  Upon  the  execution  of  this  instrument  by 
McKay,  all  the  persons  then  interested  in  the  property  or  busi- 
ness signed  an  agreement  in  the  following  terms :  "In  consid- 
eration that  the  said  Gordon  McKay  has  agreed  and  does  here- 
by bind  himself  and  agree  to  deliver  to  each  and  every  party 
having  an  interest  in  the  property  set  forth  in  the  foregoing 
certificate  and  declaration  of  trust,  a  certificate  and  declaration 
similar  to  the  foregoing  expressing  the  several  interests  of  each 
party,  in  case  all  of  the  persons  interested  in  said  property  shall 
sign  this  agreement,  we  do  hereby  severally  bind  ourselves  and 
agree  to  receive  from  said  McKay  such  certificate  and  declara- 
tion of  trust  as  the  sole  evidence  of  our  respective  interests  in 
the  above  described  property;  and  upon  the  receipt  thereof,  any 
other  certificate  or  evidence  of  title  which  we  may  hold  to  said 
property  shall  become  cancelled  and  void  and  the  same  shall  be 


Taxes.  333 

FGLEASON   v.    McKAY.] 

surrendered  to  him,  the  said  McKay."  Each  person  then  in- 
terested received  a  certificate  signed  by  the  trustee,  certifying 
that  he  was  the  owner  of  a  certain  number  of  shares  "in  the 
property  of  the  McKay  Sewing  Machine  Association"  and  the 
"shares  are  transferable  by  an  assignment  in  writing  on  this 
certificate,  and  a  surrender  of  this  certificate  to  the  trustee." 

After  the  execution  of  the  papers  and  issue  of  the  certificates, 
the  shareholders  held  a  meeting  on  May  28,  1866,  as  provided 
for  by  the  declaration  of  trust,  and  chose  an  executive  commit- 
tee and  adopted  by-laws  for  the  regulation  of  the  business  of 
the  association.  Since  said  date  the  business  of  the  association 
was  conducted  by  its  executive  committee  under  the  provisions 
of  said  declaration  and  by-laws,  McKay  holding  the  legal  title 
of  all  its  property  as  trustee  under  said  declaration,  the  title  of 
the  property  never  having  passed  from  him.  The  place  of  busi- 
ness of  the  association  was  in  Boston,  except  that  it  had  a  fac- 
tory in  Lawrence  for  the  manufacture  of  machines  and  tools. 
Except  its  machine  shop  in  Lawrence  and  the  tools  and  ma- 
chinery connected  therewith,  the  property  of  the  association  and 
the  value  of  its  shares  consisted  chiefly  of  its  interests  in  the 
letters  patent. 

Its  income  was  chiefly  derived  from  license  fees  received 
from  licensees  of  its  machines,  and  the  net  amount  of  this  in- 
come was  divided  from  time  to  time,  generally  quarterly, 
among  its  members  in  proportion  to  their  respective  shares  or 
interests.  Its  machines  were  all  leased  under  a  form  of  lease, 
the  legal  title  to  them  remaining  in  McKay  as  trustee.  On  May 
I,  1879,  there  were  1216  of  these  machines  in  the  hands  of 
licensees  distributed  throughout  the  United  States ;  and  the  in- 
terest of  McKay,  trustee,  and  of  said  association  therein,  ex- 
clusive of  the  interest  of  the  lessees,  Avas  taxed  to  said  trustee 
for  that  year  in  Boston  at  the  rate  of  $1  per  machine.    The  total 


334  Trusts  for  Business  Purposes. 

FGLE^^SON    V.    McKAY.] 

value  of  the  machines  at  that  date — May  i,  1879 — was  on  an 
average  $100  for  each  machine  which  had  been  paid  by  each 
lessee  on  the  delivery  of  the  machine  to  him.  By  a  provision  in 
all  of  said  leases,  the  lessee  upon  the  termination  of  the  lease,  if 
he  had  complied  with  its  terms,  was  entitled  to  the  machine 
absolutely,  upon  the  payment  of  $1  to  the  trustee. 

Whenever  a  member  sold  his  shares,  or  any  of  them,  new 
certificates  were  issued  to  the  purchaser,  and  such  purchasers 
thereupon  became  members  of  the  association.  Said  shares 
were  frequently  sold  and  such  sales  reported  at  auction  sales  in 
Boston,  and  were  subject  of  transfer  upon  assignment  of  cer- 
tificates of  shares  as  set  forth  in  said  certificates;  and  upon 
such  assignment,  the  assignee  was  entitled  to  receive  new  certifi- 
cates and  to  demand  and  receive  of  the  association  his  propor- 
tionate share  of  the  new  profits  of  the  association  under  said 
declaration  and  by-laws.  Such  shares  were  held  by  the  person 
holding  the  certificate  thereof,  free  from  the  control  of  any 
other  person,  and  were  subject  to  no  restrictions  or  conditions 
whatever  except  such  as  were  set  forth  in  said  certificate  and 
declaration  of  trust. 

McKay,  as  trustee  of  said  association,  was  taxed  for  its  real 
estate,  machinery  and  tools  in  Lawrence  for  the  year  1879,  as 
well  as  in  all  previous  years,  and  the  tax  was  duly  paid;  said 
real  estate  was  assessed  at  $63,500  and  said  machinen^  and  tools 
at  $71,216.  He  was  also  taxed  in  said  year  for  said  associa- 
tion, on  office  furniture,  money  on  hand,  book  accounts  and  in- 
terest in  said  machines  in  the  hands  of  licensees,  all  valued  at 
$52,291.99  and  upon  which  he  duly  paid  the  assessed  tax, 
amounting  to  $653.75.  This  valuation  did  not  include  the  in- 
terests in  the  letters  patent  held  by  him,  it  being  contended  by 
the  trustee  that  letters  patent  of  the  United  States  were  not 
subject  to  taxation. 


Taxes.  335 

[GLEASON    V.    McKAY.] 

The  tax  sought  to  be  recovered  in  this  action,  $14,253.33, 
was  assessed  upon  the  aggregate  value  of  the  shares  of  the  asso- 
ciation on  May  i,  1879  as  ascertained  by  the  tax  commissioner 
in  pursuance  of  the  provisions  of  the  St.  of  1865,  c.  283,  after 
deducting  therefrom  only  the  value  of  said  real  estate,  ma- 
chinery and  tools  taxed  at  Lawrence,  said  assessed  valuation 
being  $1,115,284.  Upon  notice  of  said  taxation,  the  said  trus- 
tee, in  behalf  of  the  association,  duly  applied  to  the  board  of 
appeal  for  a  correction  of  said  tax  upon  the  ground  that  said 
valuation  and  assessment  included  the  interest  in  said  letters 
patent  and  also  the  personal  property  taxed  in  Boston,  as  it  did 
in  fact,  at  the  same  time  claiming  that  no  tax  whatever  was  as- 
sessable against  said  trustee  or  association.  Upon  the  hearing, 
the  foregoing  facts  appeared,  but  the  board  of  appeal  declined 
to  reduce  or  alter  the  amount  of  said  valuation  or  assessment. 

Morton,  C.  J.  "The  principal  question  in  this  case  is  whether 
the  St.  of  1878,  c.  275,  as  applied  to  the  defendant,  is  constitu- 
tional. The  first  section  of  the  statute  provides  that  'chapter 
283  of  the  acts  of  the  year  1865  and  the  acts  in  amendment 
thereof,  are  hereby  extended  to  apply,  so  far  as  applicable,  to 
companies,  copartnerships  and  other  associations  having  a  loca- 
tion or  place  of  business  within  this  commonwealth,  in  which 
the  beneficial  interest  is  held  in  shares  which  are  assignable 
without  consent  of  the  other  associates  specifically  authorizing 
such  transfer.  And  the  tax  provided  for  in  said  chapter  283 
shall  be  paid  by  such  company,  copartnership  or  association, 
upon  the  aggregate  value  of  the  shares  of  said  capital  stock  in 
the  manner  provided  in  said  chapter  for  taxes  upon  corpora- 
tions.' 

The  power  of  taxation,  using  the  word  in  its  generic  sense  as 
including  all  rates  and  impositions  laid  or  levied  upon  the  peo- 
ple, is  conferred  upon  the  legislature  by  the  Constitution,  and 


336  Trusts  for  Business  Purposes. 

[GLEASON    V.    McKAY.l 

is  to  be  held  and  exercised  subject  to  the  Hmitations  imposed 
by  the  Constitution.^"  f  ^g  legislature  is  given  the  power  "to 
impose  and  levy  proportional  and  reasonable  assessments,  rates 
and  taxes,  upon  all  the  inhabitants  of,  and  persons  resident  and 
estates  lying  v^ithin  the  said  commonwealth"  and  also  power  "to 
impose  and  levy  reasonable  duties  and  excises  upon  any  pro- 
duce, goods,  wares,  merchandise  and  commodities  whatsoever, 
brought  into,  produced,  manufactured,  or  being  within  the 
same."    Const.  Mass.  c.  i,  art.  4. 

It  is  clear  that  the  statute  in  question  was  not  intended  to 
lay  a  tax  upon  property  within  the  first  of  these  clauses.  It 
does  not  purport  to  do  this.  It  merely  extends  to  certain  co- 
partnerships and  associations  the  provisions  of  the  St.  of  1865, 
c.  283,  which  chapter  has  been  held  to  levy  an  excise  upon 
corporate  franchises  and  not  to  lay  a  tax  on  property,  and  which 
chapter  can  be  sustained  as  constitutional  only  upon  the  ground 
that  it  levies  an  excise.^^  Regarded  as  a  tax  on  property,  the 
tax  we  are  considering  would  be  invalid  because  not  propor- 
tional; it  would  be  an  imposition  upon  certain  property  at  a 
rate  different  from  that  to  which  other  property  in  the  common- 
wealth is  subject.  But,  as  we  have  said,  it  does  not  purport  to 
be  a  tax  on  property.  In  lev)'ing  an  imposition  under  this  stat- 
ute no  inquiry  is  made  as  to  what  property  liable  to  taxation, 
any  copartnership  or  other  association  has  which  comes  within 
its  terms.  Such  property  remains  liable  to  taxation  under  the 
general  laws.  This  imposition  is  based  upon  the  aggregate 
value  of  the  shares  of  said  capital  stock.  Such  shares,  if  they 
can  be  said  to  be  property,  are  not  property  of  the  copartner- 
ship or  association  which  is  taxed,  but  of  the  individual  part- 

12  Oliver  v.  Washington  Mills,      Co.,    104    Mass.    586;     Common- 
11  Allen  268.  wealth  v.  Hamilton  Mfg.  Ck).,  12 

13  Murray    v.    Berkshire    Ins.      Allen  298. 


Taxes.  337 

[GLEASON    V.    McKAY.] 

ners  or  shareholders.  It  is  very  clear  that  this  was  intended 
as  an  excise  upon  some  franchises  or  privileges  sought  to  be 
held  by  the  copartnerships  or  associations  in  supposed  analogy 
to  the  franchises  of  corporations.  And  the  question  is  whether 
this  imposition  can  be  upheld  as  such  excise  within  the  second 
clause  of  the  Constitution  cited  above.  In  this  clause,  there 
are  two  limitations  upon  the  power  of  the  legislature  in  im- 
posing excises.  They  must  be  reasonable  and  they  must  be 
excises  upon  some  produce,  goods,  wares,  merchandise,  or  com- 
modities, brought  into,  produced,  manufactured,  or  being  with- 
in the  commonwealth. 

It  will  not  be  seriously  contended  that  the  privileges  or  rights 
which  are  taxed  by  this  statute  can  be  properly  described  as 
either  produce,  goods,  wares  or  merchandise.  Do  they  fairly 
come  within  the  terms  "commodities"  in  the  sense  in  which  it 
is  used  in  the  Constitution?  Ever  since  the  adoption  of  the 
Constitution,  the  legislature  in  its  practice  and  this  court  in  its 
adjudications,  have  given  a  very  broad  and  extensive  meaning 
to  this  term.  It  has  been  repeatedly  held  that  corporate  fran- 
chises enjoyed  by  grant  from  the  government  are  commodities 
and  subject  to  an  excise.  So  with  corporate  franchises  granted 
by  a  foreign  government,  which  by  comity  are  permitted  to  be 
exercised  within  this  commonwealth.  So  where  the  legislature 
has  thought,  upon  considerations  of  public  policy,  that  certain 
occupations  or  callings  of  a  public  or  quasi  public  character 
should  be  carried  on  under  governmental  regulation,  it  has  been 
usual  to  impose  a  reasonable  fee  for  a  license.^* 

This  imposition  is  clearly  not  in  the  nature  of  a  license  fee, 

14  Portland    Bank   v.   Apthorp,  Hamilton  Mfg.  Co.,  Supra;  Com- 

12  Mass.  252;   Commonwealth  v.  monwealth  v.  Cary  Imp.  Co.,  98 

People's  Five  Cents   Sav.  Bk.,  5  Mass.  19;  Connecticut  Ins.  Co.  v. 

Allen     428;     Commonwealth    v.  Commonwealth,  133  Mass.  161. 


338  Trusts  for  Business  Purposes. 

[GLEASON    V.    3IcKAY.] 

but  is  an  excise  upon  a  franchise  or  privilege.  The  right  to 
levy  excises  upon  franchises  has  never  been  extended  further 
tlian  to  corporate  franchises  specially  granted  by  the  govern- 
ment, or  enjoyed  and  exercised  by  its  permission. 

The  defendant  in  this  case  is  not  a  corporation.  It  is  merely 
a  partnership,  u'ith  all  the  incidents  and  responsibilities  of  a 
partnership.  The  firm  property  is  taxa])le  at  its  business  domi- 
cilii It  enjoys  no  franchises  conferred  upon  it  by  the  legis- 
lature. It  does  not  ask  for  or  enjoy  any  corporate  or  special 
privileges.  It  has  constituted  its  partnership  under  its  common 
law  rights  and  such  legal  agreements  as  it  chooses  to  make. 
The  peculiar  feature  that  the  interest  of  each  member  may  be 
transferred  without  the  special  assent  of  the  other  members,  is 
created  by  agreement  of  the  partners  under  their  natural  rights 
at  common  law.  We  do  not  see  how  this  peculiar  feature  can 
be  called  a  commodity  subject  to  a  special  excise,  any  more  than 
the  agreement  of  copartnership  itself,  or  any  clause  or  part  of 
it,  or  any  other  agreement,  right  or  mode  of  transacting  any 
business,  can  be  called  a  commodity,  and  so  liable  to  taxation 
at  the  will  of  the  legislature. 

If  this  tax  can  be  upheld,  it  seems  to  us  that  the  necessary 
result  will  be  that  the  legislature  has  the  power  to  select  any 
business,  occupation  or  calling  carried  on,  or  any  natural  right 
enjoyed  under  the  protection  of  our  laws,  and  impose  upon  it 
at  its  will  a  special  tax  or  excise.  This  would  be  extending  the 
meaning  of  the  word  "commodities"  beyond  any  reasonable 
limits.  Its  effect  would  be  to  break  down  the  limitations  which 
the  Constitution  intended  to  impose  upon  the  power  of  the 
legislature,  for  the  purpose  of  securing  the  end  that  all  sums 
necessary  for  the  defence  and  support  of  the  government  should 

16  Hoadley  v.  County  Coramis-    sioners,  105  Mass.  519. 


Taxes.  339 

[GLEASON    V.    McKAY.] 

as  far  as  practicable  be  raised  by  the  equal  taxation  of   the 
people. 

We  are  therefore  of  opinion  that  the  St.  of  1878,  c.  275,  so 
far  as  it  applies  to  the  defendant,  is  unconstitutional;  judgment 
for  the  defendant." 

184 — Stamp  Tax. 

A  trust  may  or  may  not  have  its  estate  represented  by  a 
certain  number  of  beneficial  interests ;  and  it  may  or  may  not 
have  certificates  to  show  the  ownership  of  the  beneficial  in- 
terests. The  trust  agreement  may  give  the  number  of  beneficial 
interests  representing  the  trust  estate  and  also  the  names  and 
number  of  the  beneficial  interests  owned  by  the  several  individu- 
als; or  the  trust  may  have  a  beneficial  interest  record  book  in 
which  are  recorded  the  names  and  number  of  interests  owned 
by  individuals;  but  if  the  trust  issues  certificates,  they  are  sub- 
ject to  the  stamp  tax  act,  for  the  theory  of  this  act  is  to  provide 
a  revenue  from  certificates  irrespective  of  whether  they  are 
issued  by  a  corporation,  association,  or  trust.  This  question 
was  determined  in  the  case  of  Pepperell  Manufacturing  Com- 
pany, a  trust,^^  which  is  in  the  main  as  follows : 

Brown,  District  Judge.  "We  are  of  the  opinion  that,  on  the 
original  issue  of  the  certificates  of  shares  of  the  Pepperell 
Manufacturing  Company,  a  manufacturing  comixmy  organized 
in  the  form  of  a  trust  under  the  common  law,  and  deriving  none 
of  its  rights,  qualities  or  benefits  from  any  statute,  there  was 
required  by  the  provisions  of  section  5,  schedule  A  of  the  War 
Tax  Taw,  so  called,  approved  October  22,  1914  (38  Stats, 
pt.  I,  pp.  745,  753,  759,  c.  331)  a  stamp  tax  of  five  cents  on 
each  $100  of  face  value  or  fraction  thereof. 

16  Malley  v.  Bowditch,  259  Fed.     809,  7  A.  L.  R.  608. 


340  Trusts  for  Business  Purposes. 

IMALLEY    V.    BOWDITCH.] 

By  agreement  and  declaration  of  trust  it  was  provided : 
"The  capital  of  this  trust  shall  be  seven  million  six  hundred 
and  sixty-eight  thousand  dollars  ($7,668,000)  divided  for  the 
purpose  of  issuing  certificates  into  76,680  sliares  of  the  par 
value  of  one  hundred  dollars  each."  There  was  thus  provided 
a  share  capital  as  a  basis  for  the  issue  of  transferable  certifi- 
cates evidencing  a  proportional  interest  therein  and  carrying 
with  them  certain  rights  while  the  company  is  a  going  concern 
and  in  its  winding  up. 

The  defendants  in  error,  the  trustees,  contend  that  these 
certificates  are  not  "certificates  of  stock."  The  word  "stock" 
however,  is  to  be  interpreted  in  connection  with  the  accompany- 
ing words  of  the  statute,  "association,  company,  or  corpora- 
tion." It  is  a  term  not  peculiar  to  corporations,  but  a  term 
equally  applicable  to  the  share  capital  or  fund  created  by  or  in 
accordance  with  an  agreement  for  the  formation  of  an  unincor- 
porated association  or  company.  The  contention  of  the  trustees 
that  "legislative  action  is  essential  to  the  creation  of  capital 
stock"  is  erroneous.  If  there  is  a  distinction  between  the  "cap- 
ital" and  the  "capital  stock"  of  corporations  in  that  the  capital 
stock  is  fixed  by  the  charter  of  a  corporation  but  that  the  cap- 
ital used  in  its  business  may  be  either  larger  or  smaller,  there 
may  be  a  like  distinction  between  the  joint  stock  or  share  cap- 
ital or  a  partnership  or  association — as  fixed  by  the  agreement 
of  the  partners — ^and  the  full  amount  of  its  property.^''^ 

An  "association"  or  "company"  equally  with  a  corporation, 

17  Lindley  on  Partnership  (8th  assets.      Collier    on    Bankruptcy 

Eng.  Ed.),  382  et  seq.     In  Bank-  (11th     Ed.),     pp.      1550,      1535. 

ruptcy  Act  Aug.   19,   1841,   c.   9,  Berthold  et  al.  v.  Goldsmith,  24 

Sec.    14,    5    Stat.    448,    and    Act  How.    541,    16    L.    Ed.    762    the 

March  2,  1867,  c.  176,  Sec.  36,  14  term  'capital  stock'  was  used  in 

Stat.  534,  the  term  'joint  stock'  the  same  sense, 
was  used  to  describe  partnership 


Taxes.  341 

[MALLEY    V.    BOVVDITCH.] 

may  have  a  share  capital  distinct  from  its  actual  capital  or  prop- 
erty, irrespective  of  whether  it  is  formed  in  a  state  without 
regulating  statutes  or  in  a  state  where  by  statute  it  is  regulated 
and  given  some  of  the  characteristics  of  a  corporation.  The 
present  statute  by  the  use  of  the  terms  "association"  and  "com- 
pany" covers  those  formed  under  the  common  law  as  well  as 
those  formed  under  or  regulated  by  statute.  It  seems  to  us 
clear  that  the  words  "certificates  of  stock"  contain  no  implica- 
tion of  an  intent  to  exclude  common-law  associations  or  com- 
panies. A  certificate  evidencing  a  transferable  share  or  shares 
in  the  share  capital  of  a  manufacturing  company,  whether  in- 
corporated, quasi  incorporated,  or  wholly  unincorporated,  is 
properly  described  as  a  "certificate  of  stock." 

By  agreement  the  certificates  in  question  were  issued  as  evi- 
dence of  shares  of  a  fixed  capital,  divided  into  a  fixed  number 
of  shares  of  the  par  value  of  $100  each.  We  are  called  upon 
to  apply  a  statute  imposing  stamp  taxes  on  documents  of  a 
certain  class,  which  assumes  that  these  documents  may  be  is- 
sued not  only  by  corporations,  but  by  associations  and  com- 
panies. These  may  have  this  in  common — a  share  capital  of 
fixed  amount.  Whether  the  share  capital  is  fixed  by  agreement 
or  under  statutory  authority  seems  immaterial,  for  the  tax  is 
not  a  franchise  tax  or  a  corporation  tax,  but  a  stamp  tax  or 
document  tax. 

The  difiference  between  corporations  and  unincorporated  as- 
sociations being  considered  immaterial  to  the  imposition  of  a 
stamp  tax  on  documents,  the  different  modes  of  realizing  upon 
the  shares  of  incorporated  or  unincorporated  companies  by  the 
certificate  holders  must  also  be  regarded  as  immaterial.  Hav- 
ing that  feature  of  resemblance  which  the  statute  fixes  upon  as 
the  test  of  the  imposition  of  a  stamp  tax,  the  dift'erence  between 
these  different  bodies  which  are  named  in  the  statute  has  be- 


342  Trusts  for  Business  Purposes. 

[MALLEY    V.    BOWDlTCH.l 

come  immaterial  to  the  question  before  us.  The  suggestion  of 
constitutional  difficulties  in  adopting  the  construction  for  which 
the  collector  contends,  and  which  we  think  right,  does  not  seem 
of  weight.  In  involves  "no  distinction  founded  upon  an  im- 
material difference  between  two  kinds  of  partnerships,"  since 
the  stamp  tax  is  contingent  upon  the  original  issue  of  "certifi- 
cates of  stock,"  just  as  a  stamp  tax  on  checks  is  contingent 
upon  the  issuing  of  checks. 

A  stamp  tax  on  documents  discriminates  between  those  who 
do  and  those  who  do  not  issue  documents ;  and  a  distinction  be- 
tween unincorporated  companies  and  associations  which  do  and 
those  which  do  not  issue  certificates  of  shares  of  stock  is  not 
unreasonable,  nor  founded  upon  an  immaterial  difference  be- 
tween two  kinds  of  partnerships. ^^  Nor  do  we  regard  it  useful 
to  consider  whether  the  right  of  the  certificate  holder  or  share- 
holder is  a  chose  in  action  or  in  the  nature  of  a  chose  in  action, 
or  an  equitable  interest  in  property.  The  certificate  is  but  a 
muniment  of  title — documentary  evidence  of  ownership — and 
not  the  share  itself.  The  thing  taxed  is  not  a  chose  in  action, 
though  it  may  be  evidence  of  it.  In  a  remote  sense  both  a  share 
of  corporate  stock  and  a  certificate  of  a  share  in  an  unincor- 
porated company  may  be  said  to  represent  an  interest  in  prop- 
erty. It  is  equally  true  that  both  may  represent  an  interest  in  a 
share  of  capital  fixed  in  amount,  whether  fixed  by  statute  or 
by  agreement. 

^^z^— Franchise  Tax  Distinguished  from  Stamp  Tax. 

In  Eliot  V.  Freeman, ^^  construing  the  corporation  tax  law 

18  Thomas  v.  United,  192  U.  S.  Ed.  415,  9  Ann.  Cas.  736. 

363-71,  24  Sup.  Ct.  305,  48  L.  Ed.  19  220    U.    S.    178,    31    Sup.    Ct. 

481;  Hatch  v.  Reardon,  204  U.  S.  360,  55  L.  Ed.  424. 
152-8-9,    27    Sup.    Ct.    188,    51    L. 


Taxes.  343 

[MALIvEY    V.    BOWDITCH.] 

(Act  Aug.  5,  1909,  c.  6,  36  Stat.  11)  it  was  held  that  the  tax 
was  imposed  upon  doing  business  in  a  corporate  or  quasi  cor- 
porate capacity.  But  that  case  is  clearly  distinguishable  from 
the  present  case  since  the  present  statute  does  not  impose  a 
franchise  tax,  but  imposes  a  stamp  tax  upon  various  kinds  of 
documents  which  may  be  issued  by  companies  either  incorpor- 
ated or  quasi  incorporated,  "or  for  or  in  respect  of  the  vellum, 
parchment,  or  paper  upon  which  such  instruments,  matters,  or 
things,  or  any  of  them  are  written  or  printed,"  etc.  See  section 
5,  38  Stat.  pt.  I,  p.  753.  In  interpreting  the  statute  we  find 
no  sufficient  reason  for  limiting  the  terms  "association"  and 
"company"  to  those  which  derive  their  powers  from  legislation. 

We  have  examined  also  the  opinion  of  the  Supreme  Court  in 
Crocker  et  al.  v.  Malley.^o  reversing  the  judgment  of  this  court. 
In  that  case  the  Supreme  Court  found  that  "The  declaration  of 
trust  on  its  face  is  an  ordinary  real  estate  trust  of  the  kind 
familiar  in  Massachusetts,  unless  in  the  particular  that  the  trus- 
tees receipt  provides  that  the  holder  has  no  interest  in  any  spe- 
cific property  and  that  it  purports  only  to  declare  the  holder 
entitled  to  a  certain  fraction  of  the  net  proceeds  of  the  property 
when  converted  into  cash  and  meantime  to  income."  It  was 
stated,  however,  in  that  case  that:  "The  function  of  the  trus- 
tees is  not  to  manage  the  mills,  but  simply  to  collect  the  rents 
and  income  of  such  property  as  may  be  in  their  hands." 

Under  the  present  declaration  of  trust  it  is  provided  that  the 
name  of  the  trust  shall  be  Pepperell  Manufacturing  Company, 
and  the  trustees  may  be  so  designated  and  in  that  name  the 
trustees  shall,  so  far  as  practicable,  conduct  the  business  of  the 
trust ;  that  the  trustees  shall  employ  and  use  the  trust  property 

20  249   U.    S.   223,    39    Sup.   Ct.       270,   63   L.    Ed.   573,   2   A.   L.    R. 

1601. 


344  Trusts  for  Business  Purposes. 

[MALLEY    V.    BOWDITCH.] 

and  assets  in  the  carrying  on  of  the  business  of  manufacturing 
textile  or  other  fabrics,  etc.  This  is  essentially  different  from 
an  ordinary  real  estate  trust  of  the  kind  familiar  in  Massachu- 
setts. If,  under  the  decision  of  the  Supreme  Court,  there  may 
be  doubt  whether  the  term  "association"  is  applicable,  there 
seems  no  ground  for  serious  doubt  of  the  applicability  of  the 
term  "company"  used  in  the  statute  and  made  a  part  of  the 
name  and  description  of  those  persons  who  are  to  conduct  the 
manufacturing  business  of  the  organization.  In  applying  this 
stamp  tax  we  find  no  substantial  reason  for  distinction  between 
this  textile  manufacturing  company  and  other  textile  manu- 
facturing companies. 

The  judgment  of  the  District  Court  is  reversed,  and  the  case 
will  be  remanded  to  that  court  with  direction  to  enter  judgment 
for  the  defendant,  and  the  plaintiff  in  error  recovers  costs  in 
both  courts." 

i86 — Income  Tax. 

The  Federal  Income  Tax  of  191 3,  under  Section  II,  G  (a) 
provided  for  taxes  on  incomes  of  corporations,  joint-stock  com- 
panies, or  associations  and  insurance  companies.  Section  II  D 
provides  for  tax  on  the  income  of  the  individual  and  in  addition 
reads  as  follows :  "Trustees,  executors,  administrators,  agents, 
receivers,  conservators,  and  all  persons,  corporations  or  associa- 
tions acting  in  any  fiduciary  capacity,  shall  make  and  render  a 
return  of  the  net  income  of  the  person  for  whom  they  act."  It 
was  decided  in  the  case  of  the  Wachusett  Real  Estate  trust,^^ 
that  a  trust  for  business  purposes  is  subject  to  Section  II  D  of 
the  Federal  Income  Tax  Act,  and  that  the  law  is  complied  with 

21  Crocker    v.    Malley,    Supra.      under  Trust  as  an  Entity. 
This  case  is  reported  in  the  main 


Taxes.  345 

when  the  trustees  as  fiduciaries  make  return  of  the  amounts 
which  the  beneficiaries  are  entitled  to  and  receive  as  profits  or 
income  of  the  trust.  No  tax  is  paid  on  the  income  of  the  trust 
as  such;  however,  the  beneficiaries  pay  income  tax  on  the  in- 
dividual dividends  or  amounts  they  receive  from  the  trust.  In 
the  case  just  cited  an  income  tax  was  assessed  against  the  trust 
as  an  association,  the  trust  paid  the  tax  under  protest  and  then 
filed  suit  against  the  collector  of  internal  revenue. 

The  District  Court  of  the  United  States  for  the  District  of 
Massachusetts,  sustained  the  theory  of  the  trustees,  that  they 
should  not  be  taxed  as  an  association  but  as  a  fiduciary  as  pro- 
vided in  Section  II  D  of  the  act.     The  collector  of  iniernal 
revenue  appealed  to  the  Circuit  Court  of  Appeals  and  there  the 
court  held  that  the  District  Court  was  in  error  and  that  the 
trust  was  properly  taxed  on  its  income  under  Section  II  G  (a) 
as  an  association.     The  trustees  then  appealed  to  the  United 
States  Supreme  Court  and  there  the  court  held  that  ''It  would 
be  a  wide  departure  from  normal  usage  to  call  the  beneficiaries 
a  joint-stock  association  when  they  are  admitted  not  to  be  part- 
ners in  any  sense,  and  when  they  have  no  joint  action  or  interest 
and  no  control  over  the  fund.    On  the  other  hand,  the  trustees 
by  themselves  cannot  be  a  joint-stock  association  within  the 
meaning  of  the  act  unless  all  trustees  with  discretionary  pow- 
ers are  such,  and  the  special  provision  for  trustees  in  D  is  to 
be  made  meaningless.    The  recovery  therefore  will  be  from  the 
United   States;  the  plaintiffs — as  they   themselves  alleged   in 
their  claim — were  the  persons  taxed,  whether  they  were  called 
an  association  or  trustees.    They  were  taxed  too  much.    Judg- 
ment of  the  Circuit  Court  of  Appeals  reversed;  judgment  of  the 
District  Court  affirmed." 


CHAPTER  XVIII. 
THIRD   PARTIES— CREDITORS. 

187 — Taking  or  Dealing  with  Trust  Property  with  Notice. 

Trust  funds  and  trust  property  are  for  the  use  and  benefit 
of  the  shareholders  exclusively,  and  one  dealing  with  a  trustee 
knowingly  in  violation  of  his  trust,  may  be  bound  to  the  extent 
of  the  trustee's  violation,  for  the  rule  is  that  one  who  receives 
with  notice,  money  or  property  of  a  trustee  in  breach  of  the 
trust,  becomes  himself  a  trustee  and  is  liable  to  account  as 
such.^^  Where  one  has  been  dealing  with  a  firm  managed  by 
three  trustees  whose  names  are  printed  on  the  letter-heads  of 
the  firm,  any  change  in  the  letter-head  is  notice  sufficient  to  put 
him  on  inquiry  as  to  the  change  in  the  management  of  the  busi- 
ness of  the  firm. 2*  Once  a  person  is  put  upon  notice  in  dealing 
with  trust  property,  it  is  his  duty  to  ascertain  the  extent  of  the 
trustee's  capacity  to  contract,  for  he  cannot  rely  on  the  ap- 
parent scope  of  such  authority. ^^ 

A  trustee  who  uses  the  trust  fund  for  purposes  of  speculation 
is  violating  the  trust ;  and  persons  who  take  the  trust  securities 
from  him  in  connection  with  such  a  transaction  with  full  notice 
that  they  are  impressed  with  the  trust,  are  bound  to  account 
for  them.^^  Where  the  facts  are  sufficient  to  put  a  person  deal- 
ing with  trustees  on  inquiry  as  to  the  limitations  on  the  powers 
and  authority  of  the  trustees,  he  wall  be  regarded  as  having  con- 

23  Donnelly  v.  Alden,  229  Mass.  25  Rand  v.  Farquahr,  226  Mass. 

109,  118  N.  E.   298.  91,  115  N.  E.  286. 

24Noyes    v.    Turnvull,    130    N.  20  English     v.     Mclntyre,      29 

Y.  639,  29  N.  E.  145.  App.  Div.  439,  51  N.  Y.  Sup.  697. 

(346) 


Third  Parties — Creditors.  347 

structive  notice  of  the  trust,  and  knowledge  of  the  trustees  vio- 
lation of  the  trust  conditions  will  be  chargeable  to  him.^''^ 

i88 — Creditors  of  Trust  Company. 

The  question  as  to  whether  parties  dealing  with  trustees  are 
creditors  of  the  trustees  personally  or  of  the  trust  company,  de- 
pends upon  the  authority  of  the  trustees  to  bind  the  trust  estate 
and  whether  the  creditor  accepts  the  trustees  personally  on  the 
trust  estate  for  the  debt.  Where  the  trust  instrument  expressly 
authorizes  the  trustee  to  invest  the  trust  funds  in  merchandise — 
it  being  apparent  that  it  is  intended  he  should  use  them  in  his 
business — a  party  selling  merchandise  to  the  trustee  may  look  to 
the  estate  for  payment  therefor.^s  Contractors  may  agree  witli 
trustees  to  erect  a  building  and  to  look  only  to  the  trust  fund 
for  their  compensation,  and  afterwards  agree  to  do  certain  addi- 
tional work ;  the  question  as  to  whether  the  additional  work  is 
a  charge  against  the  trustees  personally  or  the  trust  estate  is 
one  of  intention  of  the  parties.^^  Where  trustees  are  authorized 
to  carry  on  a  business  and  contract  debts,  with  provisions  that 
at  the  termination  of  the  trust  and  before  a  transfer  of  the 
property,  they  shall  be  indemnified  against  any  personal  liability 
incurred  in  the  proper  execution  of  the  trust,  creditors  may  at 
the  expiration  of  the  trust  period  and  before  a  transfer  of  the 
property,  sue  in  equity  to  have  the  rights  of  the  trustees  for 
indemnity  out  of  the  trust  fund  enforced  in  their  favor  for  the 
payment  of  their  claims.^** 

27  Ludington  v.  Mercantile  30  Mason  v.  Pomeroy,  151  Mass. 
Natl.  Bank,  102  App.  Dlv.  251,  164,  24  N.  E.  202.  See  also: 
92  N.  Y.  Sup.  454.  Liability  of  Trustees,  Limitation 

28  Wadsworth,  Rowland  &  Co.  of  Trustee's  Liability,  Liability 
V.  Arnold,  24  R.  I.  32,  51  Atl.  of  Beneficiaries,  and  Benefi- 
1041.  claries  not  liable  as  partners. 

29  Rand  v.  Farqualir,  Supra. 


CHAPTER  XIX. 
BANKRUPTCY. 

189 — In  General. 

The  bankruptcy  act  was  intended  not  only  to  secure  equality 
among  creditors,  but  also  to  benefit  the  debtor  in  discharging 
him  from  his  liabilities.^^  The  releasing  of  the  bankrupt  from 
his  debts  is  a  most  important  consideration  in  determining 
whether  trusts  may  be  adjudged  bankrupt.  In  a  pure  trust, 
properly  drawn,  the  trustees  hold  title  to  all  property,  and  their 
liability  is  limited  by  the  trust  agreement  so  there  is  no  necessity 
for  a  discharge  or  a  release  as  to  them,  because  there  is  no  lia- 
bility; the  beneficiaries  or  shareholders  are  also  exempt  from 
liability  and  to  this  extent  they  should  come  under  the  same 
rule  as  the  trustees.  So  it  would  seem  that  in  a  pure  trust  there 
is  no  one  to  discharge  from  liability  and  for  that  reason  the 
bankruptcy  act  should  not  apply  to  it.  The  act  itself  is  silent  as 
to  adjudication  of  a  trust  so,  for  the  present  at  least,  we  shall 
have  to  look  to  the  courts  and  their  decisions  and  from  that 
source  draw  our  conclusions  as  to  whether  this  form  of  business 
organization  is  subject  to  adjudication  in  bankruptcy. 

In  its  relation  to  the  trust,  the  bankruptcy  act  was  discussed 
in  the  case  of  the  Co-Operative  Society  of  America  by  Judge 
Evans  of  the  District  Court,  Northern  District  of  Illinois.*^  jn 
this  case  an  involuntary  petition  in  bankruptcy  was  filed;  a 
motion  was  made  by  the  trustees  to  dismiss  the  petition  on  the 

313  R.  C.  L.  164.  29464),   275  Fed.  868. 

32  In    re    Parker,    et    al.    (No. 

(348) 


Bankruptcy.  349 

[IN  BE  PARKER,  et  al.] 

ground  tliat  they  were  not  insolvent  and  that  they  were  not 
subject  to  the  bankruptcy  laws.  The  court  said  in  passing  on 
the  motion :  "The  bankruptcy  act  was  a  general  enactment  of 
a  remedial  character,  and  should  be  liberally  construed  to  effect 
the  purposes  of  the  enactment.^^  The  general  object  of  the 
act,  as  I  understand  it,  is  to  secure  an  equal  distribution  of  the 
assets  of  an  insolvent  party  among  the  unsecured  creditors. 
The  respondents  (the  Co-Operative  Society  of  America)  assert 
that  they  are  the  trustees  of  a  "common-law  trust"  or  a  "pure 
trust"  or  a  "Massachusetts  trust,"  and  are  not  subject  to  the 
bankruptcy  act,  though  engaged  in  a  commercial  enterprise  of 
wide  scope  and  in  various  fields.  One  is  impressed  therefore, 
at  the  outset,  that  if  such  a  commercial  enterprise  is  not  subject 
to  the  bankruptcy  act,  it  was  an  oversight  on  the  part  of  con- 
gress. 

But,  confessedly,  the  bankruptcy  act  must  itself  furnish  the 
answer  to  this  first  query.  In  other  words,  if  the  bankruptcy 
act  does  not  make  business  concerns,  associations,  or  companies 
of  the  character  of  the  respondents,  subject  to  an  adjudication 
in  bankruptcy,  this  court  must  dismiss  the  petition.  It  likewise 
appears  to  me  that  if  the  bankruptcy  act  covers  or  includes  com- 
panies like  respondents,  it  must  be  by  virtue  of  sections  4  and 
5  of  the  act.  These  two  sections  define  the  parties  who  may  be 
adjudged  a  voluntary  bankrupt,  as  well  as  an  involuntary  bank- 
rupt. Examining  section  4b,  we  can  readily  understand  who 
is  defined  by  the  term  "natural  person."  Likewise  we  may 
readily  know  who  is  meant  by  a  "partnership"  as  used  in  sec- 
tion 5.  With  equal  certainty  we  may  understand  what  is  meant 
by  the  term  "corporation"  as  used  in  section  4b,  but  uncertainty 
may  well  arise  over  the  term  "unincorporated  company."    Re- 

38  5  Cyc.  242. 


350  Trusts  for  Business  Purposes. 

[IN   RE   PARKEK,  et   al.l 

spondents  ask  the  court  to  give  this  term  a  restricted  meaning. 
But  should  the  court  do  so,  if  the  result  of  such  a  construction 
is  to  defeat  in  part,  at  least,  the  manifest  purpose  of  the  entire 
enactment  ? 

The  words  "any  unincorporated  company"  were  not  present 
in  the  act  when  it  was  originally  introduced  in  congress.  They 
were  added  in  the  committee.  The  term  is  comprehensive  in 
its  ordinary  and  usual  meaning.  When  used  with  the  other 
terms,  "natural  person,"  "corporation,"  and  "copartnership"  it 
completes  the  description  of  all  subjects  which  may  be  adjudged 
bankrupts.  It  seems  to  me  that  its  insertion  in  the  act  denotes 
a  congressional  intent  to  be  inclusive  in  the  characterization  of 
organizations  or  of  individuals  subject  to  bankruptcy.  If  the 
words  be  given  their  normal  meaning  used  as  a  part  of  the 
entire  context,  we  can  find  nothing  in  the  adjective  "imincor- 
porated"  that  does  not  include  respondents.  The  adjective  plus 
the  noun  "company"  is,  of  course,  more  elastic,  more  uncertain ; 
but,  used  in  connection  with  the  words  "natural  person"  and 
"corporation,"  it  is  entitled  to  such  a  meaning  as  will  cover 
that  which  is  neither  corporation,  natural  person,  nor  copartner- 
ship. 

A  reading  of  section  4a  strengthens  this  conclusion.  There 
congress  uses  an  expression  which,  properly  construed  in  the 
light  of  the  exceptions,  includes  everything  that  transacted 
business.  Section  4b  is  not  less  comprehensive,  but  the  excep- 
tions are  more  inclusive.  These  views  find  support  in  Collier 
on  Bankruptcy .3*  I  recognize  a  contrary  expression  of  opinion 
which  may  be  found  in  Sears'  work  on  Trusts." 

Considering  all  phases  of  this  question,  the  court  concludes 

34  11th  Ed.  p.  154.     In  matter      Sparta  (Vadakin  v.  Cass  et  al.), 
of  Associated  Trusts  (D.  C.)  222      242  Fed.  235,  155  C.  C.  A.  75. 
Fed.    1012   and    In   re   Order   of 


Bankruptcy.  351 

[IN  RE  PARKER,  et   aJ.] 

that  the  answer  to  the  first  query  must  be  in  the  affirmative,  i.  e. 
that  the  Co-Operative  Society  of  America,  a  trust,  may  be  de- 
clared a  bankrupt  and  made  amenable  to  the  present  bankruptcy 
law.  (Note.)  In  reaching  its  decision  the  court  said  it  could 
readily  understand  that  the  trust  was  not  included  in  the  act 
under  the  terms  "natural  person"  "partnership,"  or  "corpora- 
tion" but  was  included  under  the  term  "unincorporated  com- 
pany." In  sustaining  this  theory  the  court  reads  other  cases^* 
intO'  the  record  which  w^e  shall  examine  briefly.  In  the  Order 
of  Sparta  case  the  question  of  its  being  a  trust  was  not  in- 
volved, it  was  an  unincorporated  association,  so  for  that  reason 
this  case  may  be  dismissed  from  the  present  consideration.  In 
the  other  case  relied  on  by  the  court.  In  re  Associated  Trust, 
the  court  found  the  trust  to  be  an  unincorporated  company. 
These  decisions  are  predicated  upon  the  theory  that  the  trust 
with  capital,  shares  and  certificates — and  carrying  on  a  business 
— has  no  standing  in  law  as  a  trust,  but  must  be  classed  as  an 
"unincorporated  company,"  "association"  or  something  other 
than  what  it  really  is.  This  theory  cannot  prevail  for  the 
courts  time  after  time  have  recognized  the  trust — as  such — for 
business  purposes. 


(Note)  Since  the  above  was 
written  tlie  United  States  Cir- 
cuit Court  of  Appeals  reversed 
the  decision  of  Judge  Evans, 
saying  in  part,  (Judge  Baker) 
If  the  alleged  fact  was  the  truth, 
if  the  only  relationship  between 
plaintiffs  and  defendants  was 
that  of  beneficiaries  and  trustees 
of  an  express  trust  wherein  the 
trustees  had  full  title  and  con- 
trol and  the  beneficiaries  had  no 


title  and  no  control  beyond  ap- 
pealing to  a  court  to  restrain 
waste  and  malfeasance,  then  the 
facts  should  have  been  pleaded 
so  that  a  demurrer  could  test  the 
question  whether  the  bankrupcty 
statute  infringes  upon  the  other- 
wise exclusive  jurisdiction  of 
equity  over  trusts. 

35  In  re  Associated  Trust,  222 
Fed.  1012;  In  re  Order  of  Sparta, 
242  Fed.  235,  155  C.  C.  A.  75. 


352  Trusts  for  Business  Purposes. 

[IN   BE   PARKER,  et   al.] 

In  passing  on  the  trust  as  an  entity,  the  state  of  Texas  says  :^^ 
"The  first  question  arising  on  the  appeal  is  whether  the  agree- 
ment entered  into  between  the  parties  to  the  suit,  and  under  the 
terms  on  which  they  organized  and  were  conducting  the  busi- 
ness in  which  they  were  engaged,  created  a  partnership  or  an 
unincorporated  company,  or  a  trust  as  distinguished  from  a 
partnership  or  such  company.  We  have  examined  the  trust 
agreement  in  question  and  the  authorities  at  our  command  bear- 
ing on  the  subject  as  carefully  as  we  have  been  able  to  do,  and 
conclude  that  said  agreement  created  a  'trust'  and  not  a  com- 
pany, association,  or  partnership." 

It  was  argued  by  the  distinguished  lawyer,  Joseph  H.  Choate, 
in  the  case  of  Rice  v.  Rockefeller ,2'  that  "this  trust  or  consolida- 
tion of  interests  is  not  a  corporation  or  an  association,  or  a 
partnership.  So  far  as  it  is  anything  legally  tangible,  it  is  an 
ordinary  trust — the  creation  of  a  court  of  equity."  This  is  the 
view  adopted  generally,^®  the  one  followed  by  the  United  States 
Supreme  Court  for  it  says  a  trust  is  not  a  joint-stock  association 
or  company,  and  "we  perceive  no  ground  for  grouping  tlie  two 
— ^beneficiaries  and  trustees — together  in  order  to  turn  them 
into  an  association  by  uniting  their  contrasted  functions  and 
powers;  although  they  are  in  no  proper  sense  associated.  It 
seems  to  be  an  unnatural  perversion  of  a  well  known  institution 
of  the  law."39  Clearly,  a  trust  is  a  well-known  institution  of  the 
law,  and  should  not  be  termed — for  bankruptcy  or  other  pur- 
poses— an  unincorporated  company. 

36  Davis  V.  Hudgins,  225  S.  W.  38  Wrightington  —  Unincorpo- 
73^                                                            rated    Associations    Sears    work 

37  134  N.  Y.  174,  31  N.  E.  900,      on  Trusts,  7  A.  L.  R.  613. 

17  L.  R.  A.  237,  30  Am.  St.  Rep.  39  Crocker  v,  Malley,  249  U.  S. 

658.  223.  39  Sup.  Ct.  Rep.  270,  63  L. 

Ed.  573,  2  A.  L.  R.  1801. 


Bankruptcy,  353 

[davis  v.  hudgins.] 

190 — Receivership. 

The  question  now  arises  if  a  trvist  cannot  be  declared  a 
bankrupt  and  is  not  subject  to  the  bankruptcy  law,  what  is  the 
proper  procedure  in  case  of  insolvency,  dissipation  of  trust 
assets,  and  like  conditions.  Inasmuch  as  the  trust  is  subject  to 
a  court  of  equity,  a  receiver  may  be  appointed  in  all  proper 
cases.  The  rights  of  the  beneficiaries  to  have  a  receiver  ap- 
pointed for  a  trust  is  discussed  in  the  case  of  Davis  v.  Hud- 
kins.*°  There  the  plaintiffs'  application  for  the  appointment  of 
a  receiver  came  on  to  be  heard,  and  the  demurrers  were  over- 
ruled. Then  the  court,  apart  from  the  sworn  pleadings,  heard 
the  oral  testimony  of  several  witnesses  introduced  by  the  re- 
spective parties,  and  was  of  opinion  that  the  application  should 
be  granted  and  thereupon  by  order  and  decree  entered,  ap- 
pointed R.  Sneed  Kimbrough  receiver  to  take  charge  of,  keep 
possession  of,  and  hold  subject  to  the  further  orders  of  the 
court,  all  of  the  assets  and  property  owned  or  belonging  to  the 
Davis-Coggins  Oil  Company,  a  trust.  From  this  order  and 
judgment  of  the  court,  the  defendant  J.  C.  Davis  for  himself 
and  the  Davis-Coggins  Oil  Company  appealed.  In  passing  on 
the  questions  raised  the  court  said : 

"The  first  question  arising  on  the  appeal  is  whether  the  agree- 
ment entered  into  between  the  parties  to  the  suit,  and  under  the 
terms  on  which  they  organized  and  were  conducting  the  busi- 
ness in  which  they  were  engaged,  created  a  partnership  or  an 
unincorporated  joint-stock  company,  or  a  trust  as  distinguished 
from  a  partnership  or  such  company.  We  have  no  statute  de- 
fining an  unincorporated  joint-stock  company  or  association, 
and  we  gather  from  decisiouL  and  elementary  works  that  some 

40  225  S.  W.  73.  See  paragraph  in  emergency  ex-parte  and  with- 
85 — Receiver   may   be   appointed      out  notice. 


354  Trusts  for  Business  Purposes. 

[DA>T[S    V.    HUDGINS.] 

of  them  combine  the  elements  of  both  partnership  and  trust, 
while  others  are  essentially  trusts  and  not  partnerships.  This 
we  think  is  undoubtedly  true,  but  it  is  equally  true  that  it  is 
frequently  a  difficult  problem  to  determine  the  line  that  divides 
them.  We  shall  not  undertake  to  point  out  this  line  of  demarka- 
tion  as  shown  by  the  authorities,  but  shall  content  ourselves, 
for  the  purposes  of  this  opinion,  with  the  statement  that  we 
have  examined  the  trust  agreement  in  question  and  the  authori- 
ties at  our  command  bearing  upon  the  subject,  as  carefully  as 
we  have  been  able  to  do,  and  conclude  that  said  agreement  cre- 
ated a  trust,  and  not  a  company,  association,  or  partnership. 
The  written  articles  of  association  here  are  very  similar,  in  es- 
sential particulars,  to  those  expressed  in  the  instrument  involved 
in  the  case  of  Bingham  v.  Graham,*^  and  in  that  case  it  was 
held  that  the  'association'  belonged  to  the  class  designated  as 
'trusts'  by  Mr.  Wrightington  in  his  work  on  Unincorporated 
Associations.  If  our  conclusions  that  the  trust  agreement  here 
in  question  created  a  trust  as  distinguished  from  a  partnership 
is  correct,  then  the  contention  of  appellant  to  the  effect  that 
the  suit  ought  to  be  abated  for  the  want  of  necessary  parties 
should  not  be  sustained. 

191 — N'ot  Necessary  for  All  Beneficiaries  to  Join  in  Suit  for 
Receiver. 

The  relation  existing  between  the  parties  not  being  that  of 
partners  in  the  sense  that  the  trust  agreement  created  an  ordi- 
nary partnership,  it  was  not  necessary  that  all  of  the  stock- 
holders of  the  association  be  made  parties  to  the  suit.  Wliile 
the  rule  is  well  established  that  all  parties  in  interest  ought  to 

41  (Tex.),  220  S.  W.  105. 


Bankruptcy.  355 

[DAVIS    V.    HCDGIKS.] 

be  made  parties,  there  are  exceptions  to  the  rule.  .  The  case,  as 
shown  by  the  pleadings,  is  one  in  which  the  defendants,  trus- 
tees, are  sued  by  some  of  the  beneficiaries,  not  only  for  them- 
selves, but  for  all  the  minority  stockholders  of  the  association, 
alle2"ing  breach  of  trust,  misapplication  of  trust  funds  and 
assets  of  the  association  for  their  own  personal  gain  and  profit, 
etc..  and  praying  for  the  appointment  of  a  receiver.  Although 
proper  parties,  it  Avas  not  essential  to  the  right  of  the  named 
plaintiffs  to  bring  and  maintain  this  suit  that  all  stockholders 
of  the  association  not  named  as  plaintiffs,  but  in  whose  behalf 
the  suit  was  brought,  should  appear  as  active  parties  to  the  suit. 
We  understand  it  is  well  established  that  suits  in  equity  may 
be  brought  by  or  against  some  of  the  members  of  an  associatio)i 
or  trust  like  the  one  under  consideration  as  representatives  of 
all  the  members.  This  seems  to  be  especially  true  in  such  cases 
where,  as  here,  the  defendants  were  managing  officers  or  trus- 
tees. Such  cases  simply  declare  the  equitable  doctrine  of  virtual 
representation  and  the  doctrine  has  in  many  cases  been  applied 
to  members  of  unincorporated  associations.  The  rule  has  been 
applied  in  a  suit  to  enjoin  a  strike  of  laborers,  the  court  holding 
that  it  was  sufficient  to  bring  in  the  leaders  of  the  strike  to 
represent  the  organization,  regardless  of  their  official  relation 
to  the  society.*^ 

As  an  exception  to  the  rule  that  all  persons  having  an  interest 
in  the  subject  matter  of  an  equity  suit  must  be  made  parties, 
the  doctrine  of  virtual  representation,  which  originated  at  an 
early  date,  recognizes  the  right  of  a  few  persons  to  sue  for 
themselves  and  all  others  similarly  situated.  Under  this  doc- 
trine, the  persons  who  are  not  joined  by  name  as  parties  are 

42  American  Steel  v.  Wire  Fed.  598,  20  R.  C.  L.  669,  sec.  9. 
Drawers,  Nos.  1,  3,    (C.  C),  90 


356  Trusts  for  Business  Purposes. 

[DAVIS    V.    HUDGINS.] 

in  a  sense  before  the  court.     They  have  been  called  quasi  par- 
ties and  have  been  said  to  be  parties  even  in  substance  and  legal 
effect.    In  all  cases  to  which  the  doctrine  of  representation  ap- 
plies there  must  be  joined  as  parties,  persons  who  fairly  repre- 
sent the  interest  or  right  involved  so  that  it  may  be  tried  fairly 
and  honestly.     It  is  sufficient  if  the  parties  before  the  court 
enable  it  fairly  and  fully  to  adjudicate  the  question  involved. 
The  parties  represented  must  have  a  common  interest  with  those 
before  the  court  and  consequently  the  parties  before  the  court 
cannot  act  as  representatives  if  their  interests  are  antagonistic 
to  those  who  would  be  represented.    The  most  frequent  applica- 
tion of  the  doctrine  of  virtual  representation  is  to  members  of 
a  class.     And  while  this  doctrine  has  been  applied  to  the  mem- 
bers of  a  class  who  have  a  common  or  general  interest,  and  it 
is  difficult  or  inconvenient  to  make  all  of  them  parties,  though 
they  are  not  numerous,  yet  many  decisions  have  established  the 
rule  that  the  doctrine  applies  only  where  the  persons  interested 
are  numerous,  so  that  it  would  be  impracticable  or  inconvenient 
to  make  all  of  them  parties.     And  so,  a  suit  in  equity  may  be 
brought  by  some  of  the  members  of  an  unincorporated  associa- 
tion as  representatives  of  all  the  members,  whether  organizeil 
for  public  or  private  purposes,  and  in  some  of  the  cases  relating 
to  members  of   such  associations  stress  has  been  laid  on  the 
fact  that  the  members  were  numerous.     The  doctrine  of  repre- 
sentation has  also  been  recognized  in  cases  of  trusts,  so  that 
persons  beneficially  interested  are  considered  as  represented  by 
one  occupying  a  trust  relation,  especially  when  the  cestuis  que 
trusts  are  numerous,  so  that  it  would  be  impracticable  to  bring 
all  of  them  before  the  court.*^ 

In  section  11  of  the  authority  just  quoted,  it  is  said:    "Apart 

43  Ruling   Case    Law,    Vol.    20,  Sec.  9. 


Bankruptcy.  357 

[DAVIS    V.    HUDGINS.] 

from  the  question  of  the  parties  being  numerous,  the  rule  of 
representation  has  been  applied  to  defendants  representing  as 
trustees  all  parties  having  a  beneficial  interest  in  the  subject- 
matter."  We  think  the  plea  of  non-joinder  of  parties  in  this 
case  was  properly  overruled. 

192 — Evidence  Must  be  Positive  as  to  Wrong-doing  of  Trustee 
Before  Court  Will  Appoint  Receiver. 

The  next  question  for  consideration  is  whether  or  not  the 
trial  court  was  authorized  under  the  evidence  adduced,  to 
appoint  a  receiver.  Our  conclusion  is,  this  question  should 
be  answered  in  the  negative.  The  hearing  of  the  applica- 
tion for  a  receiver  was  not  submitted  and  determined  on  the 
sworn  pleadings  of  the  parties.  Apart  therefrom,  and  as  a  basis 
for  the  court's  action,  oral  testimony  of  witnesses  was  heard. 
Admitting  for  the  purpose  of  this  appeal  that  the  appellees' 
petition  showed  a  cause  of  action,  and  that  the  facts  alleged 
were  sufficient  to  justify  the  court  in  the  exercise  of  a  sound 
discretion  to  grant  the  prayer  for  a  receiver,  yet,  in  the  opin- 
ion of  this  court,  the  testimony  introduced  and  upon  which 
the  court  evidently  predicated  its  decision,  was  wholly  in- 
sufificient  to  authorize  the  appointment  of  a  receiver,  and  for 
that  reason  the  judgment  must  be  reversed. 

In  reaching  this  conclusion  we  are  not  unmindful  of  the 
prevailing  rule  that  the  appointment  of  a  receiver  rests  largely 
in  the  discretion  of  the  court  and  that  the  appellate  courts 
will  not  ordinarily  interfere  therein  unless  an  abuse  of  dis- 
cretion appears.  It  is  well  said,  however,  that  the  remedy 
of  a  receivership  is  in  all  cases  to  be  cautiously  applied  and 
that  receivers  should  not  be  appointed  except  on  a  clear  show- 


358  Trusts  for  Business  Purposes. 

[DAVIS    V.    HUDGIN8.] 

ing  that  the  apphcant's  rights  imperatively  demand  it.** 

The  record  discloses  the  formation  of  a  trust  and  that  by 
the  declaration  of  a  trust  executed,  the  management  of  all  the 
affairs  of  the  association  so  fonned  was  vested  in  a  named 
board  of  trustees  and  their  successors,  the  board  having  the 
power  to  elect  a  president,  vice  president,  secretary  and  treas- 
urer, and  to  create  such  other  offices  and  appoint  such  other 
officers  as  the  board  might  deem  proper.  The  instrument 
further  vests  the  title  to  all  property  acquired  or  to  be  ac- 
quired by  the  association  in  such  trustees  as  joint  tenants. 
Upon  the  trustees  is  conferred,  among  other  things,  full  power 
and  authority,  upon  a  majority  vote  of  the  board,  to  conduct 
the  business  and  to  do  and  perform  all  things  which  in  their 
judgment  might  be  necessary  in  the  management  and  conduct 
of  the  business.  The  trustees  by  the  instrument  referred  to 
are  given  the  power  and  authority,  not  only  to  manage  the 
property  of  the  association,  but,  to  "invest,  reinvest,  and  dis- 
pose of  the  same  and  to  collect  and  receive  and  distribute 
the  income  and  profits  therefrom  for  the  benefit  of  the  hold- 
ers of  the  certificates  of  shares  from  time  to  time  issued  and 
outstanding  under  said  instrument  in  the  manner  and  sub- 
ject to  the  stipulations  and  limitations  therein  contained." 
It  is  stipulated  that  "the  trustees  shall  have  and  exercise  the 
exclusive  management  and  control  of  all  property  at  any 
time  belonging  to  the  trust,"  with  all  the  rights  and  powers 
of  absolute  owners  thereof,  subject  only  to  the  purposes  of 
the  agreement  entered  into;  and  in  the  conduct  of  the  busi- 
ness to  execute  contracts  in  the  names  of  the  trustees  as  may 
be  necessary  or  convenient;  to  purchase,  contract  for,  lease 

44  Galvin  v.  McConnell,  53  People's  Inv.  Co.  v.  Crawford 
Tex.  Civ.  App.  486,  117  S.  W.  211;       (Tex.  Civ.  App.),  45  S.  W.  738. 


Bankruptcy.  359 

[DAVIS    V.    HUDGINS.] 

or  otherwise  acquire  such  property  as  they  may  deem  nec- 
essary or  proper;  and  to  sell  and  convey  any  part  of  the 
property  of  the  trust. 

A  detailed  statement  in  this  opinion  of  the  testimony  is 
impracticable.  A  careful  examination  of  it,  however,  has 
convinced  us  that  it  is  too  lacking  in  probative  force  to  justify 
the  conclusion  that  defendants  have  been  guilty  of  such  fraud, 
mismanagement  of  the  property  and  affairs  of  the  association 
in  question,  or  dissipation  oi  its  assets  as  justified  the  ap- 
pointment of  a  receiver.  The  testimony  of  the  witnesses  of- 
fered by  appellees  as  to  some  of  the  charges  of  wrong-doing 
on  the  part  of  the  defendants  is  of  a  negative  character  and 
insufficient  to  sustain  any  of  them  that  would  warrant  the 
appointment  of  a  receiver,  while  the  testimony  of  the  wit- 
nesses offered  by  the  defendants  shows  conclusively  that  no 
ground  for  the  appointment  of  a  receiver  existed  at  the  time 
of  the  hearing  of  the  application  therefor.  The  charge  and 
contention  that  the  trustees  failed  to  call  the  annual  meet- 
ings, or  meeting,  for  the  election  of  trustees  as  provided  for 
in  the  trust  agreement,  is  based  upon  the  testimony  of  ap- 
pellees' witnesses,  to  the  effect  that  they  had  no  knowledge 
of  any  such  calls,  or  meetings,  whereas  the  testimony  of  the 
witnesses  tendered  by  the  defendants  shows  that  such  meet- 
ings, practically  as  directed  by  the  terms  of  the  trust  agree- 
ment, were  called. 

The  charge  that  the  trustees  in  control  of  the  business  of 
the  association  refused  to  permit  the  stockholders  to  investi- 
gate its  affairs  or  to  have  a  voice  in  the  selection  of  the  officers 
of  the  association  is  not  sustained  by  the  testimony  of  the 
plaintiff's  witnesses  and  is  disproved  by  the  testimony  of  the 
defendants'  witnesses.  Besides  the  trust  agreement,  as  we 
understand   it,   shows  that   the   trustees   were  authorized  and 


360  Trusts  for  Business  Purposes. 

[DAVIS    V.    HUDGINS.] 

empowered  to  select  the  company's  officers.  We  do  not  think 
there  is  any  testimony  to  warrant  the  conclusion  that  the 
defendants  or  trustees  surrendered  to  J.  C.  Davis  alone  con- 
trol of  the  assets  of  the  association.  Nor  do  we  think  that 
the  evidence  warrants  the  conclusion  that  the  books  of  the 
association  were  never  opened  by  the  trustees  to  the  inspec- 
tion of  the  stockholders  and  no  account  of  the  disposition 
of  its  funds  kept.  On  the  contrary,  we  think  it  very  con- 
clusively appears  from  the  testimony  in  the  record  that  books 
of  the  association  were  opened,  and  an  account,  whether 
entirely  accurate  or  not,  was  kept.  The  purchase  of  the 
eleven  acres  of  land  described  in  plaintiffs'  petition  and  the 
appropriation  of  $15,000  in  payment  therefor  out  of  the 
money  received  from  stockholders  was  not,  we  think,  in  ex- 
cess of  or  in  violation  of  the  powers  vested  in  them  by  the 
terms  of  the  trust  agreement.  This  land,  it  appears,  was 
purchased  for  the  association,  and  is  held  by  the  trustees  like 
other  property  over  which  they  were  given  full  and  abso- 
lute control,  for  the  benefit  of  the  association.  Nor  do  we 
think  the  issuance  of  what  is  termed  "promotion  stock"  is 
in  violation  of  the  trust  agreement  or  the  authority  given 
thereby  to  the  trustees,  or  operated  to  render  the  company 
insolvent. 

Upon  the  w'hole  we  conclude  that  the  facts  presented  fail 
to  disclose  any  such  invasions  of  the  rights  of  the  plaintiffs, 
or  danger  that  the  property  of  the  association  in  question  will 
not  be  preserved,  as  authorizes  the  appointment  of  a  receiver. 
This  court  has  heretofore  said  that  the  appointment  of  re- 
ceivers "is  regarded  as  one  of  the  most  difficult  and  embar- 
rassing duties  which  a  court  of  equity  is  called  upon  to  per- 
form," and  is  not  to  be  exercised  doubtingly,  but  that  the 
court  must  be  convinced  that  the  relief  is  needful  and  that  it 


Bankruptcy.  361 

[DAVIS    V.    HUDGINS.] 

is  the  appropriate  means  of  securing  an  appropriate  end.**^ 
The  petition  for  the  appointment  of  a  receiver  was  verified 
by  the  affidavit  of  the  plaintiff  J.  C.  Wright,  and  should  it 
be  conceded  that,  had  the  application  for  the  appointment  of 
a  receiver  been  submitted  on  the  petition  and  answer  and 
receiver  appointed,  we  would  not  be  warranted  in  disturb- 
ing the  court's  action,  yet  it  is  clear  that  the  oral  testimony 
of  Mr.  Wright  given  upon  the  hearing,  as  sent  to  this  court, 
does  not  support  the  allegations  of  the  petition  sufficiently 
to  justify  the  appointment  made. 

44s  Harris  v.  Hicks,  13  Tex.  Civ.  App.  134,  34  S.  W.  983. 


CHAPTER  XX. 
BUSINESS  AND  LEGISLATION. 

193 — In  General. 

The  business  world  is  well  aware  of  the  cost  and  annoyance 
it  has  expended  in  the  past  due  to  the  numerous  changes  and 
amendments  tO'  the  corporation  law  with  which  it  had  to  com- 
ply. Naturally  it  turns  to  the  trust  with  the  query,  is  it 
possible  for  the  legislature  to  enact  such  laws  that  would 
force  all  business  to  organize  as  corporations?  Thus  far  the 
legislature  has  applied  its  will  only  to  banking  and  insurance. 
Some  of  this  legislation  has  been  sustained  on  the  theory  of 
regulation;  some  has  been  declared  unconstitutional  on  the 
ground  of  class  legislation  and  that  it  was  an  infringement 
on  individual  rights.  Inasmuch  as  the  trust  is  organized  as 
a  matter  of  right,  it  may  be  laid  down  as  a  general  principle 
that  any  business  the  individual  may  engage  in  may  also  be 
deeded  in  trust,  and,  as  such,  be  operated. 

However,  the  question  is  still  an  open  one  as  regards  the 
validity  of  legislative  enactment  compelling  banks  and  in- 
surance companies  to  incorporate;  both  sides  of  this  question 
will  be  presented  hereinafter  in  well-argued  cases.  In  Weed 
V.  Bergh,*5  the  court  sustained  the  Wisconsin  banl<ing  act 
in  that  banking  is  not  legal  within  that  state  only  as  it  is 
incorporated.     In  the  case  of  Commonwealth  v.  Vrooman,*^ 

45  141  Wis.  569,  124  N.  W.  664,  25  L.  R.  A.  250,  44  Am.  St.  Rep. 
25  L.  R.  A.  (N.  S.)  1217.        603. 

46  164  Pa.  St.  306,  30  Atl.  217, 

(362) 


Busine;ss  and  LegisIvATion.  363 

the  majority  opinion  of  the  court  upheld  the  insurance  law 
of  Pennsylvania  in  that  those  who  wanted  to  engage  in  that 
line  of  business  would,  of  necessity,  have  to  incorporate.  Yet, 
Judge  Dean  writes  a  masterly  dissenting  opinion  on  the  ques- 
tion of  regulation  and  prohibition,  in  which  Judge  Green 
and  Chief  Justice  Sterret  concur.  In  the  case  of  State  v. 
Scougal,*''  the  court  asks,  can  the  legislature  create  a  fran- 
chise by  depriving  citizens  of  their  rights  and  then  bestow  it 
upon  another  at  will?  If  it  can,  then  the  citizen  has  no  rights 
that  may  not  be  taken  from  him  under  this  new  theory  of  a 
franchise  created  by  the  legislature.  In  this  case  the  court  up- 
holds the  rights  of  individuals  and  declares  the  banlcing  act 
unconstitutional  which  in  the  main  provides  that  no  banking 
may  be  done  in  South  Dakota  only  as  it  is  incorporated.  These 
cases  will  be  taken  up  in  the  order  as  above  mentioned. 

194 — Banking  Limited  to  Corporations. 

In  the  case  of  Weed  v.  Bergh,  supra,  the  courts  upheld 
the  constitionality  of  the  Wisconsin  banking  act  Hmiting  this 
business  to  corporation  only.  In  that  case  an  action  in  equity 
was  brought  by  a  private  banking  partnership  against  the 
banking  commissioner  and  the  district  attorney  of  Waupaca 
county  to  restrain  those  officials  from  enforcing  chapter  285, 
Laws  1909,  requiring  all  private  banking  concerns  to  incorpo- 
rate, on  the  ground  that  the  law  is  unconstitutional.  The 
plaintiffs  appealed  from  an  order  sustaining  a  general  de- 
murrer to  the  complaint  by  which  it  was  alleged  that  the 
plaintiffs  were  copartners  and  had  been  such  for  many  years ; 
they  were  engaged  in  the  lumber,  farming  and  milling  busi- 
ness at  Weyauwega,  Wisconsin;  since  1870  they  had  also  been 

47  3  S.  D.  55,  51  N.  W.  858,  15    L.  R.  A.  477,  44  Am.  St.  Rep.  756. 


364  Trusts  for  Business  Purposes. 

[WEED    V.    BERGH.] 

doing  a  banking  business  at  Weyauwega  consisting  of  receiv- 
ing deposits,  discounting  and  negotiating  notes,  buying  and 
selling  exchange,  etc.,  that  in  1873  they  organized  a  corpora- 
tion with  capital  stock  of  $30,000  called  the  Weed  and  Gumaer 
Manufacturing  Company  to  carry  on  their  general  business, 
which  corporation  kept  separate  books  of  account  and  had 
assets  consisting  of  unencumbered  real  estate,  mills,  and  other 
property  in  and  about  Weyauwega  worth  $160,000;  that  the 
copartnership  had  on  deposit  with  it  as  private  banker  up- 
wards of  $250,000  and  loaned  out  over  $200,000  on  first-class 
securities,  many  of  which  would  not  come  due  till  after  Sep- 
tember I,  1909;  that  they  passed  successfully  through  the 
panics  of  1893  and  1907  and  had  the  confidence  and  respect 
of  the  community;  that  the  defendant  Bergh  as  state  banking 
commissioner  and  the  defendant  Severson  as  district  attorney, 
threatened  that  unless  the  plaintiffs  incorporated  or  got  out 
of  the  banking  business,  they  would  cause  criminal  warrants 
to  be  issued  and  prosecute  the  plaintiffs  under  chapter  285, 
Laws  1909;  that  in  order  to  comply  with  that  law,  it  would 
be  necessary  for  plaintiffs  to  incorporate  in  a  sum  in  excess 
of  $150,000  or  to  convert  immediately  their  real  estate  and 
chattel  holdings  into  personal  property,  and  that  to  attempt 
such  a  thing  would  result  in  forced  sales  at  inadequate  prices, 
confiscation  of  their  property,  destruction  of  their  business, 
and  irreparable  damage;  that  the  law  violated  the  following 
provisions  of  the  constitution  of  Wisconsin,  viz:  article  i.  Sec- 
tion I :  "All  men  are  born  equally  free  and  independent  and 
have  certain  inherent  rights,  among  these  are  life,  liberty  and 
the  pursuit  of  happiness;"  article  i,  Section  8:  "No  person 
shall  be  held  to  answer  for  a  criminal  offense  without  due 
process  of  law;"  article  i.  Section  13:  "The  property  of 
no   person  shall   be   taken   for   public  use  without   just  com- 


Business  and  Legislation.  365 

[WEED    V.    BERGH.] 

pensation  therefor;"  article  i,  Section  22:  "The  blessings  of 
a  free  government  can  only  be  maintained  by  a  firm  adher- 
ence to  justice,  moderation,  temperance,  frugality,  and  virtue, 
and  by  frequent  recurrence  to  fundamental  principles;"  that 
the  law  also  violated  the  fourteenth  Amendment  to  the  Con- 
stitution of  the  United  States,  which  inhibits  any  state  from, 
depriving  any  person  of  life,  liberty,  or  property  without  due 
process  of  law,  and  from  denying  to  any  person  the  equal 
protection  of  the  laws. 

Chapter  285  of  the  laws  of  1909  adds  three  sections  to  the 
general  banking  laws  of  Wisconsin,  numbered  respectively, 
2024-78 1,  2024-78m,  2024-78n.  The  first  of  these  sections 
provides  that  "the  soliciting,  receiving,  or  accepting  of  money, 
or  its  equivalent,  on  deposit  as  a  regular  business  by  any 
person,  copartnership,  association,  or  corporation  shall  be 
deemed  to  be  doing  a  banking  business,  whether  such  deposit 
is  made  subject  to  a  check  or  is  evidenced  by  a  certificate 
of  deposit,  a  pass  book,  a  note,  'a  receipt,  or  other  writing, 
provided  that  nothing  herein  shall  apply  to  or  include  money 
left  with  an  agent  pending  investment  in  real  estate  or  se- 
curities for  or  on  account  of  his  principal."  The  second  of 
the  sections  named  makes  it  unlawful  for  any  person,  co- 
partnership, association,  or  corporation  to  do  a  banking  busi- 
ness without  being  incorporated  as  either  a  national,  state, 
mutual  savings,  or  trust  company  bank,  and  makes  a  viola- 
tion of  the  provision  a  misdemeanor  punishable  by  fine  or 
imprisonment  or  both.  The  third  of  the  sections  provides 
that  any  person,  copartnership,  association,  or  corporation 
doing  business  in  the  state  as  defined  in  the  act  may  incorpo- 
rate as  a  state  bank  on  or  before  September  i,  1909,  as  pro- 
vided in  Section  2024-55  of  the  statutes.  The  act  was  ap- 
proved June   3,    1909,   and   published   on   the    following   day. 


366  Trusts  for  Business  Purposes. 

TWEED    V.    BERGH.l 

The  general  banking  law  of  the  state  (Section  2015  to  2024- 
81,  Sanborn's  Stat.  Supp.  1906)  was  passed  as  Chapter  234, 
Laws  1903,  and  was  amended  by  chapter  109,  Laws  1905, 
and  these  laws  as  well  as  the  amendment  now  under  con- 
sideration, were  passed  supposedly  pursuant  to  the  terms  of 
the  amendment  to  Section  4,  article  11  of  the  constitution 
adopted  by  the  general  election  of  1902,  authorizing  the  legis- 
lature by  two-thirds  vote  of  the  members  elect  of  each  House 
to  enact  a  general  banking  law  "for  the  creation  of  banks 
and  for  the  regulation  and  supervision  of  the  banking  busi- 


ness." 


The  plaintiffs  claimed  that  the  act  of  1909  was  unconsti- 
tutional on  two  general  grounds ;  first,  because  every  citizen 
has  a  common-law  right  to  transact  a  banking  business  and 
the  law  in  question  amounts  to  a  prohibition  of  that  right; 
second,  because  the  law  in  question  fixes  so  short  a  time 
within  which  the  plaintiffs  must  convert  their  private  insti- 
tution into  an  incorporated  institution  that  it  can  not  be  obeyed 
without  a  ruinous  sacrifice  of  property  amounting  to  practical 
confiscation. 

On  these  questions  the  court  says :  "There  are  some  funda- 
mental propositions  so  well  settled  that  it  is  only  necessary 
to  state  them.  Among  these  are  the  following;  first,  banking 
is  a  common-law  right  pertaining  equally  to  every  member 
of  the  community;  second,  being  a  common-law  right,  it  can- 
not be  prohibited  under  a  constitution  like  ours  which  recog- 
nizes the  right  and  grants  power  to  the  legislature  to  regu- 
late and  supervise  it ;  third,  under  such  a  constitution  as  ours, 
banking  may  be  regulated  so  far  as  may  be  reasonably  neces- 
sary to  secure  the  public  welfare  and  safety,  but  it  must  be 
true  regulation,  and  not  prohibition  under  the  guise  of  regu- 
lation,    (i  Morse,  Banks  and  Banking,  Section  13.) 


Business  and  Le;gislation.  367 

[WEED    V.    BERGH.l 

With  these  principles  in  mind,  it  seems  evident  that  the 
ultimate  question  under  this  head  is  whether  the  requirement 
that  all  who  wish  to  enter  into  the  business  should  incorporate 
is  in  fact  regulation,  or  prohibition  masquerading  as  regu- 
lation. The  question  is  not  whether  it  be  the  wisest  form  of 
regulation,  or  whether  it  be  a  form  which  commends  itself  to 
the  judgment  as  ideal,  but  whether  it  be  in  fact  a  bona  fide 
form  of  regulation  with  some  reasonable  adaptation  to  meet 
and  overcome  any  evils  or  dangers  to  the  public  which  may 
lurk  in  unrestrained  exercise  of  banking  rights  by  individuals. 
We  think  it  is.  If  it  should  be  granted  that  individual  bank- 
ers may  be  successfully  subjected  to  all  the  provisions  as  to 
visitation,  inspection,  examination,  and  the  making  of  reports 
to  the  same  extent  as  corporations,  it  still  must  be  conceded 
that  there  are  at  least  two  well-defined  dangers  to  the  public 
which  are  and  must  be  present  in  private  banking  which  are 
eliminated  in  corporate  banking.  The  first  of  these  is  the 
danger  that  the  private  banker,  by  engaging  in  outside  busi- 
ness ventures,  may  subject  his  banking  assets  to  the  claims 
of  business  creditors,  and  thus  greatly  prejudice,  if  not  de- 
stroy, the  remedies  of  bank  depositors;  and  the  second  is 
the  danger  and  inconvenience  which  is  likely  to  result  when 
a  private  banker  dies  and  the  business  has  to  be  temporarily 
suspended  for  the  purpose  of  probating  the  estate,  involving 
perhaps,  destruction  of  public  confidence  and  a  run  on  the 
institution. 

Both  of  these  dangers  are  quite  real  and  serious,  and  both 
are  quite  effectually  eliminated  in  the  case  of  a  corporation 
whose  business  enterprises  are  strictly  limited  to  banking, 
and  which  does  not  die.  It  will  not  avail  to  say  that  possibly 
remedies  might  be  devised  to  meet  these  inherent  dangers 
arising  in  individual  banking  by  other   forms  of  regulation, 


1 


368  Trusts  for  Business  Purposes. 

[WEED    V.    BEKGH.l 

though  we  are  incHned  to  think  that  this  would  be  very  dififi-, 
cult  of  accomplishment  without  overstepping  some  of  the 
constitutional  guaranties  of  rights  to  the  citizen.  If,  as  a 
matter  of  fact,  the  requirement  of  incorporation  is  a  form 
of  regulation  reasonably  calculated  to  meet  and  remedy  these 
difficulties,  though  not  in  the  wisest  way,  it  must  be  sustained 
as  an  exercise  of  the  police  power.  We  have  been  referred 
to  but  one  case  which  holds  the  contrary  doctrine,  namely: 
State  V.  Scougal,  supra,  which  indeed  holds  that  an  act  re- 
quiring incorporation  as  a  condition  of  doing  banking  is  un- 
constitutional. The  discussion  of  the  question  there  is  long 
and  learned,  but  not  convincing  to  us.  It  is  to  be  noted, 
further,  that  the  constitution  of  South  Dakota  contains  an 
unusual  provision  which  figures  largely  in  the  result.  This 
provision  is  to  the  efifect  that  no  law  shall  grant  to  any  citi- 
zen, class  of  citizens,  or  corporations,  privileges  or  immuni- 
ties which  on  the  same  terms  shall  not  equally  belong  to 
all  citizens  or  corporations ;  the  weight  of  decision  as  well  as 
text-book  authority  is  the  other  way."*® 

195 — Regulation  is  not  Prohibition. 

"The  objection  that  the  law  absolutely  prohibits  an  individ- 
ual banker  from  doing  business  and  hence  cannot  be  consid- 
ered as  valid  regulation,  is  plausible,  but  not  convincing. 
Many  police  regulations  have  the  effect  of  prohibiting  a  busi- 
ness unless  certain  conditions  are  first  complied  with.  The 
legislature  says :     'If  you  wish  to  engage  in  this  quasi  public 

48  1  Morse,  Banks  &  Banking,  Woodmansee,  1  N.  D.  246,  11  L. 

Sec.  13,  5  Cyc.  Law  &  Proc.  433;  R.  A.  420,  46  N.  W.  971;    Myers 

Boone,  Banks  and  Banking,  Sec.  v.  Manhattan  Bank,  20  Ohio  283. 
10;     State    ex    rel.    Goodsill    v. 


Business  and  Legislation.  369 

[WEED    V.    BERGH.] 

business  of  banking,  you  must  first  secure  a  corporate  charter.' 
It  does  not  say :  'You  can  not  go  into  it,  but  you  must  go 
into  it  in  a  certain  way  which  is  deemed  the  safest  for  the 
pubHc'  The  obtaining  of  a  bank  charter  is  made  by  the  act 
practically  a  matter  of  course.  Three  adult  residents  of  the 
state  may  at  any  time  associate  together,  execute  the  required 
articles  and  file  them,  and  the  corporation  is  formed.  The 
danger  that  any  citizen  who  wishes  to  go  into  the  banking 
business  will  be  unable  to  find  two  other  adult  residents  who 
will  be  willing  to  join  in  executing  the  written  articles  of  in- 
corporation is  so  small  as  to  be  negligible.  People  can  do 
banking  as  before,  except  that  they  must  do  it  by  means  of 
a  corporate  organization.    This  is  regulation,  not  prohibition.*® 

The  scope  of  the  act  under  consideration,  and  the  question 
as  to  the  kinds  of  business  which  it  covers,  are  considered  in 
the  case  of  Maclaren  v.  State. ^°  As  the  act,  under  any  pos- 
sible construction,  unquestionably  applies  to  the  business  trans- 
acted by  the  appellants,  it  becomes  unnecessary  to  consider 
in  this  opinion  what  other  business  operations  it  may  cover. 

The  act  gives  but  three  months  in  which  to  convert  a  private 
bank  into  a  corporate  bank,  and  the  complaint  alleges  that  the 
plaintiffs  will  be  obliged  either  to  incorporate  in  a  sum  ex- 
ceeding $150,000  as  a  capitalization,  or  immediately  convert 
their  real  estate  and  chattels  into  money  at  forced  sales — which 
would  entail  great  loss  and  practical  confiscation.  The  com- 
plaint alleges  that  the  deposits  of  the  bank  aggregate 
$250,000  and  the  loans  and  discounts  on  first-class  securities  in- 
cluding loans  to  the  Weed  &  Gumaer  Manufacturing  Company, 
a  corporation,   exceed  $200,000.     The   amount  of  cash   and 

49  Commonwealth  v.  Vrooman,       248,  44  N.  Y.  Sup.  42. 
Supra;  People  v.  Loew,  19  Misc.  60  141  Wis.  577,  124  N.  W.  667. 


2,70  Trusts  for  Business  Purposes, 

[WEED    V.    BERGH.] 

other  assets  is  not  stated.  In  villages  having  less  than  1,500 
inhabitants  (of  which  class  Weyauwega  is  one),  the  capital 
stock  of  a  bank  is  not  required  to  be  more  than  $10,000,  (San- 
born's Stat.  Sup.  1906,  Sec.  2024-6)  The  allegation  that  in 
order  to  incorporate  under  the  law,  the  plaintiffs  will  be 
obliged  to  capitalize  at  $150,000,  or  dispose  of  their  real 
property  apparently  has  no  foundation,  unless  it  means  that 
as  private  bankers  they  have  loaned  to  their  corporation  so 
large  a  sum  that  under  the  provisions  of  Sec.  2024-32  they 
must  have  a  capitalization  of  that  amount  in  order  that  the 
loans  to  a  single  corporation  will  not  exceed  that  fraction  of 
the  capital  stock  which  that  section  prescribes,  viz :  thirty 
per  cent  of  capital  and  surplus  or  fifty  per  cent  in  case  such 
percentage  is  approved  by  a  two-thirds  vote  of  the  directors. 

If  this  be  the  case,  still  we  fail  to  see  how  the  sacrifice  of 
the  plaintiffs'  property  is  necessitated.  According  to  the  com- 
plaint, the  corporation  has  $160,000  worth  of  unincumbered 
real  and  personal  property.  It  goes  without  saying  that  loans 
on  this  property  can  be  readily  obtained  at  reasonable  rates 
of  interest  on  long  or  short  time  as  the  plaintiffs  may  desire, 
which  would  enable  them  to  reduce  their  bank  loans  to  any 
figure  which  may  seem  best.  All  the  time  necessary  to  con- 
vert their  property  into  money  at  the  most  favorable  prices 
may  thus  be  obtained. 

A  minor  objection  is  made  to  the  act  in  this :  that  it  is 
alleged  that  the  proviso  appearing  at  the  end  of  the  first  sec- 
tion of  the  act  as  printed  appeared  in  the  first  line  of  the 
section  after  the  words  'to  read'  when  the  act  went  to  the 
governor  for  his  approval.  Referring  to  the  Senate  Journal 
for  1909  pp.  793,  863,  it  appears  that  the  bill  as  introduced 
in  the  senate  lacked  the  proviso,  but  that  it  was  amended  in 
the  senate  by  adding  at  the  end  of  Sec.   i  the  proviso,  and 


■•?■ 

I 


Business  and  Legislation.  371 

[WEED    T.    BERGH.] 

as  so  amended  was  concurred  in  by  the  assembly.  Section  i 
of  the  bin  does  not  end  with  the  words  'to  read'  but  rather 
with  the  word  'statutes'  at  the  end  of  Sec.  202/^-y^n,  a  posi- 
tion where  it  would  be  exactly  as  appropriate  and  forceful 
as  at  the  end  of  Sec.  2024-78 1.  It  further  appears  (Senate 
Journal  p.  874)  that  a  resolution  was  passed  in  the  senate 
directing  the  committee  on  enrolled  bills  to  correct  the  error 
and  place  the  amendment  at  the  end  of  Sec.  2024-78  1.  This 
resolution  however,  does  not  appear  to  have  passed  the  as- 
sembly. In  any  event,  it  seems  immaterial.  The  bill  passed 
with  the  proviso  in  a  place  where  it  would  be  just  as  effective 
as  in  the  place  where  it  appears  in  the  printed  statutes,  and 
the  change  of  position,  even  if  unauthorized,  cannot  be  con- 
sidered as  vitiating  the  legislation;  order  affirmed." 

196 — Insurance  Limited  to  Corporations. 

The  majority  of  the  court  in  the  case  of  Commonwealth  v. 
Vrooman  uphold  the  constitutionality  of  the  insurance  act  of 
Pennsylvania  which  limits  the  business  of  insurance  to  cor- 
porations. In  this  case  an  appeal  was  taken  by  the  State  from 
a  judgment  of  the  Court  of  Quarter  Sessions  for  Philadelphia 
County  in  favor  of  defendant  upon  an  indictment  charging 
him  with  unlawfully  issuing  a  policy  of  fire  insurance.  The 
defendant  acting  for  himself  and  as  attorney-in-fact  for  J. 
K.  Cuming,  R.  H.  Foerderer,  B.  J.  Woodward,  C.  A.  Furbush 
and  J.  Gibson  Mcllvain,  signed  and  issued  on  the  12th  day 
of  March,  1894,  a  certain  policy  of  insurance  and  contract 
of  guaranty  against  loss  by  fire  in  the  sum  of  $1000  on  the 
household  furniture  of  James  G.  Kimball,  located  in  the  county 
of  Philadelphia,  Pennsylvania,  without  authority  expressly 
conferred  by  a  charter  of  incorporation  given  according  to 
law  April  12,  1894. 


372  Trusts  for  Business  Purposes. 

tCOaiMONWEALTH    v.    VROOMAN.] 

"This  case  raises  a  question  of  constitutional  law  that  does 
not  seem  to  have  been  decided  by  the  courts  of  this  state. 
The  facts  are  that  in  1870  the  legislature  passed  and  the 
governor  approved  an  act  entitled  'An  act  to  prevent  the  is- 
sue of  unauthorized  policies  of  insurance.'  Section  i  made 
it  unlawful  for  any  person,  partnership,  or  association  to  issue 
any  policy  of  insurance  against  fire  without  authority  to  do 
so  expressly  conferred  by  a  charter  of  incorporation  given 
according  to  law ;  and  declared  all  policies  issued  without 
such  authority  void.  Section  2  made  it  a  misdemeanor  to 
issue  a  policy  of  insurance  against  loss  by  fire  without  the 
authority  required  by  the  first  section.  The  special  verdict 
rendered  in  this  case  found  that  the  defendant  did  violate 
the  act  of  1870  by  making  and  issuing  for  himself  and  others 
a  policy  against  loss  by  fire  in  the  year  1894  without  having 
obtained  a  charter  of  incorporation  authorizing  the  making  of 
such  insurance. 

Upon  this  verdict  the  learned  judge  of  the  court  below 
entered  a  judgment  in  favor  of  the  defendant,  holding  that 
the  Act  of  1870  was  void  because  in  violation  of  the  Consti- 
tution of  the  United  States  and  of  this  State;  the  common- 
wealth appealed.  A  single  question  is  thus  presented,  viz: 
does  the  Act  of  1870  violate  the  Constitution  of  either  the 
United  States  or  this  state?  The  learned  judge  held  that  the 
Fourteenth  Amendment  to  the  Constitution  of  the  United 
States  was  infringed  by  the  Act  of  1870.  This  amendment 
declares  that  "no  state  shall  make  or  enforce  any  law  which 
shall  abridge  the  privileges  or  immunities  of  citizens  of  the 
United  States,  nor  deny  to  any  within  its  jurisdiction  the 
equal  protection  of  the  laws."  The  purpose  and  efifect  of  this 
amendment  have  been  discussed  and  declared  by  the  United 
States  courts  in  many  cases,  and  there  ought  to  be  no  doubt 


Business  and  Legislation.  373 

[COMMONWEALTH    v.    VROOIAN.] 

Upon  the  subject  at  this  time.  It  was  aimed  at  discrimina- 
tions made  or  attempted  by  the  laws  of  any  of  the  states 
against  persons  upon  whom  the  laws  of  the  United  States 
conferred  the  rights  and  privileges  of  citizenship.  Such  dis- 
criminations whether  directed  against  persons  of  a  particular 
race  or  color  resident  within  the  state,  or  against  persons 
resident  in  other  states,  are  forbidden  by  the  Fourteenth 
Amendment. 

But  the  proper  exercise  of  the  police  power  by  the  several 
states  is  not  within  the  intent  or  the  letter  of  the  amend- 
ment.^^ On  the  other  hand  its  purpose  as  declared  in  the 
slaughter-house  cases^^  to  be  to  protect  "against  the  hostile 
legislation  of  the  states,  the  privileges  and  immunities  of  citi- 
zens of  the  United  States  as  distinguished  from  the  privileges 
and  immunities  of  citizens  of  the  states."  The  Act  of  1870 
strikes  at  no  privilege  of  citizenship  of  the  United  States  as 
distinguished  from  the  privileges  of  citizenship  of  Pennsyl- 
vania. It  does  not  attempt  to  draw  a  line  between  citizens  of 
this  state  and  citizens  of  other  states,  it  is,  therefore,  in  no 
sense  a  violation  of  the  Fourteenth  Amendment  of  the  Con- 
stitution of  the  United  States,  and  this  branch  of  the  discus- 
sion may  be  properly  dropped  at  this  point  and  our  attention 
confined  to  the  other,  viz: 

197 — Police  Pozver  in  General. 

Is  the  Act  of  1870  a  violation  of  the  first  section  of  the 
bill  of  rights  in  the  constitution  of  this  state?  That  section 
affirms  that  all  "men  are  born  equally   free  and  independent 

61  Powell  V.  Pennsylvania,  127  52  83  U.  S.  16,  Wall.  36,  21  L. 

U.  S.  678,  32  L.  Ed.  253,  8  Sup.      Ed.  394. 
Ct.  Rep.  992. 


374  Trusts  for  Business  Purposes. 

ICOMMONWEALTH    v.    VKOO^IAN.] 

and  have  certain  inherent  and  unalienable  rights,  among  which 
are  those  of  acquiring,  possessing  and  protecting  property 
and  reputation."  The  methods  by  which  this  right  to  acquire 
property  is  asserted  and  exercised  are,  and  have  been  since 
organized  government  began  among  men,  subject  to  regula- 
tion by  law.  The  power  of  government  thus  brought  into 
service  is  known  as  the  police  power.  If  the  Act  of  1870  is 
a  valid  exercise  of  the  police  power,  then  no  constitutional 
right  is  invaded,  but  the  mode  in  which  the  right  guaranteed 
by  the  first  section  of  the  bill  of  rights  may  be  exercised  con- 
sistently with  the  best  good  of  the  greatest  number  is  regu- 
lated and  prescribed.  The  general  character  of  the  police 
power  is  well  understood  although  neither  the  text-books  nor 
decided  cases  have  yet  given  us  an  adequate  definition  of  it. 
Little  more  has  been  attempted  by  the  courts  of  this  country 
than  to  determine  that  a  particular  subject  does  or  does  not  fall 
within  the  range  of  this  power.  An  illustration  is  afforded  by 
Boston  Beer  Co.  v.  Massachusetts,^^  in  which  this  language  was 
used :  "However  difficult  it  may  be  to  render  a  satisfactory 
definition  of  it  (the  police  power)  there  seems  to  be  no  doubt  *j 

that  it  does  extend  to  the  protection  of  the  lives,  health,  and 
property  of  the  citizens,  and  to  the  preservation  of  good  order 
and  the  public  morals." 

Blackstone  in  his  Commentaries,  vol.  4,  p.  162,  describes 
this  power  as  the  power  of  "public  police  and  economy"  by 
which  the  internal  regulation  and  good  order  of  the  state  is 
secured,  and  individual  citizens,  like  the  members  of  a  well- 
ordered  family,  are  made  to  conform  their  conduct  to  the  rules 
of  propriety,  good  neighborhood  and  good  manners.  It  is 
therefore  a  power  inherent  in  all  forms  of  government.     Its 

68  97  U.  S.  25,  24  L.  Ed.  989. 


>! 


BuSINi:SS  AND   LlIGISIvATlON.  375 

[COMMONWEAXTH    v.    VROOMAN.] 

exercise  may  be  limited  by  the  frame  or  constitution  of  a 
particular  government,  but  its  natural  limitations,  in  the  ab- 
sence of  a  written  constitution,  are  found  in  the  situation  and 
necessities  of  the  state,  and  these  must  be  judged  of  in  the 
first  instance  by  the  government  itself.  It  corresponds  to  the 
right  of  self-preservation  in  the  individual.  When  the  dan- 
gers that  threatened  the  state  come  from  without;  the  right  of 
self-preservation  is  exercised  in  gathering  armies  and  the 
means  of  public  defence.  When  the  dangers  arise  within  the 
state,  self-preservation  requires  their  suppression.  This  is 
accomplished  by  the  exercise  of  the  police  power  which  deals 
with  all  forms  of  disorder,  and  provides  for  the  public  wel- 
fare and  the  protection  of  citizens  against  the  violence  and 
the  fraudulent  conduct  of  each  other. 

Now  the  question  whether  any  particular  subject  is  so  re- 
lated to  the  public  good  as  to  justify  the  exercise  of  this 
power  in  its  control,  is  one  for  the  determination,  in  the  first 
instance,  of  the  lawmaking  branch  of  the  government.  In  dis- 
posing of  it  the  legislature  is  subject  to  no  limitations  ex- 
cept such  as  the  constitution  of  the  state  may  impose.  Within 
the  lines  set  by  constitutional  provisions  the  power  of  the 
legislature  is  practically  absolute;  but  if  it  is  alleged  that  a 
given  police  regulation  violates  the  fundamental  law,  a  ques- 
tion is  raised  for  the  determination  of  the  courts  whose  duty 
it  is  to  apply  the  constitutional  tests  and  adjudge  the  law  to 
be  void  if  it  is  in  conflict  with  them.  In  this  case  we  are  to 
apply  the  first  section  of  the  bill  of  rights  to  the  Act  of  1870 
in  order  to  determine  whether  it  can  be  enforced.  If  the  act 
denies  the  inherent  and  inalienable  right  of  the  citizen  to 
acquire,  possess,  and  protect  property — which  is  asserted  by 
this  section  of  the  bill  of  rights — then  the  judgment  of  the 
court  below  was  right  and  this  appeal  should  be  dismissed; 


m 


376  Trusts  for  Business  Purposes. 

[COMMONWEALTH   v.    VROOMAN.] 

but  if  this  right  is  not  denied,  and  the  effect  of  the  Act  of 
1870   is   merely   to   regulate   its   exercise,   then   the   judgment  M 

should  be  reversed  and  the  defendant  should  suffer  the  pen- 
alty of  the  law  he  has  disregarded.  j| 

Before  entering  upon  this  question,  three  preliminary  obser- 
vations should  be  made:  first,   we  must  remember  that  the 
legal  presumption  is  in  favor  of  the  constitutionality  of  the 
act  because  it  expresses  the  judgment  of  the  legislative  branch 
of  the  government  upon  that  question.     The  legislature  has 
considered  the  question  and  passed  upon  it  and  this  makes  a 
prima  facie  case  in   favor  of  the  law.     We  observe  in  the 
next  place   that   this   question   is  to  be   considered   upon  the 
state  of  the  law  as  it  is  when  the  question  is  raised.     Since 
1870  the  constitution  of  the  state  has  been  remodeled   and 
many  of  its  new  provisions  have  been  enforced  by  suitable 
legislation.     Our  question  is  not,  therefore,  whether  the  Act 
of    1870  was   valid  under  the  constitution   as   it   then   stood, 
but  whether  it  was  valid  when  its  provisions  were  invoked 
against  the  defendant  in  1894.     Our  third  observation  is  that 
the  question  is  not  controlled  by  common-law  maxims.     The 
police  power  must  necessarily  enlarge  its  range  as  business 
expands  and  society  develops.     The  proper  office  of  statutes 
is  to  remedy  the  defects  and  modify  the  operation  of  common- 
law  rules  to  meet  changed  conditions  in  society  and  increased 
volume  and  improved  methods  in  business. 

198 — Insurance  in  Relation  to  Police  Pozver. 

We  come  now  to  inquire  whether  the  business  of  insurance 
against  loss  by  fire  is  at  the  present  time  a  proper  subject  for 
the  exercise  of  the  police  power  of  the  state.  In  examining 
this   question   it   is   important  to   know   something   about  the 


Business  and  Legislation.  377 

[COMMONWEALTH    v.    VROOMAN.] 

magnitude  of  the  business.     The  report  of  the  insurance  com- 
misssioner  appointed  under  the  laws  of  the  state,  covering  the 
transactions  of  the  year  1892  shows  that  risks  were  written  in 
Pennsylvania  during  that  year  as  follows: 
By   stock   companies   of   Pennsylvania  $286,584,023 

other  states  412,489,251 

U.  S.  Branches  Foreign  Companies  248,407,450 

Mutual  companies  of  Pennsylvania  137,328,820 


$1,084,809,544 
making  the  enormous  total  of  one  billion  and  nearly  eighty-five 
millions  of  dollars.  The  losses  paid  in  the  same  year  as  shown 
by  the  same  report  amounted  to  nearly  seven  and  one-quarter 
millions  of  dollars.  The  total  capital  employed  in  the  busi- 
ness of  fire  insurance  in  this  state  during  the  year  was  nearly 
two  hundred  sixteen  and  one-half  millions  of  dollars.  The 
premiums  paid  by  the  insured  fell  a  little  short  of  twelve  mil- 
lions of  dollars. 

Let  us  consider  next  the  nature  of  the  business.  It  is  not 
like  the  sale  of  commodities  for  a  present  equivalent  in  value, 
but  it  is  the  purchase  of  indemnity  against  the  risk  of  loss 
by  fire  that  may  happen  at  any  time,  and  may  not  happen  at 
all.  The  conditions  necessary  to  the  business  of  insurance 
are:  (a)  the  existence  of  a  known  danger  to  which  all  prop- 
erty owners  are  exposed  and  against  which  they  cannot  ef- 
fectually protect  themselves;  (b)  the  strong  probability  that 
loss  from  this  danger  will  fall  upon  but  few  of  those  who  are 
exposed  to  it ;  (c)  the  certainty  that  when  the  loss  happens 
it  will  fall  so  heavily  on  those  to  whom  it  comes  as  to  make 
pecuniary  indemnity  a  matter  of  great  importance;  (d)  some 
knowledge  of  the  relative  value  of  the  property  annually  de- 
stroyed by  fire  to  serve  as  a  basis   for  calculating  the   risk 


378  Trusts  for  Business  Purposes. 

[COMMONWEALTH   v.    VROOMAN.] 

assumed  by  the  insurer,  and  the  amount  of  premium  required 
to  enable  the  insurer  to  meet  losses  and  expenses  and  secure 
a  fair  return  for  the  capital  employed. 

In  view  of  the  magnitude  and  the  nature  of  the  insurance 
business  it  is  apparent  that  the  public  is  largely  interested  in 
all  that  relates  to  it.     The  security  of  policy  holders  requires : 
first,  permanency  in  the  custodian  of  the  funds  gathered  from 
them  and  on  which  their  indemnity  in  case  of  loss  depends; 
second,    an   honest    and    competent    administration    of    these 
funds ;  third ;  restraint  against  the  division  of  the  profits  of 
the  business  whenever  such  division  would  injuriously  affect 
the  security  of  policy  holders.     How  are  these  safeguards  to 
be  obtained?     There  is  but  one  way   in  which  they  can  be 
obtained  and  that  is  by  means  of  general  laws  regulating  the 
insurance  business.     Corporations  derive  their  existence  from 
the  state  and  hold  their  franchises  subject  to  legislative  con- 
trol.    They  are  subject  to  the  visitorial  power  of  common- 
wealth, and  they  may  be,  and  are  in  fact,  required  to  lay  open 
before  the  several  departments  of  state  government,  and  before 
the  public,   the   character   and   extent   of   their  business,   the 
profits  realized,  the  dividends  declared,  and  the  investments 
made.     The  legality  and  business  value  of  the  methods,  the 
economy,  and  financial  strength  of  the  management,  and  the 
value  of  the  security  provided  for  the  holders  of  policies  in 
any  given   company   are   therefore  subjects   upon  which  the 
proper  state  officers  may  be  thoroughly  informed,  and  which 
the  public  may  investigate  at  will.     Private  individuals  are 
not  subject  to  the  same  visitorial  power.     They  can  not  ordi- 
narily be  compelled  to  disclose  their  business  methods,  their 
financial    condition,    or    the    character    of    their    investments. 
They  cannot  be  restricted  in  the  use  of  either  their  capital  or 
their  profits  as  corporations  may  be.     Those  who  deal  with 


Business  and  Legislation.  379 

[COMMONWEALTH    v.    VKOOMAN.] 

them  must  trust  more  to  their  personal  integrity  than  the 
common  experience  shows  to  be  safe.  The  state  can  com- 
pel a  fair  measure  of  fidelity  in  the  management  of  these  vast 
sums,  and  provide  for  the  safety  of  the  insured  when,  and  only 
when,  the  business  is  in  the  hands  of  corporations. 

199 — Modern  Legislation   on   Insurance. 

In  the  next  place  it  is  important  to  consider  what  may  be 
described  as  the  trend  of  modern  legislation  on  this  subject. 
The  states  of  the  Union  have  severally  entered  upon  legis- 
lation regulating  insurance.  In  each  an  insurance  department 
of  the  state  government  has  been  organized.  A  general  super- 
vision and  control  of  insurance  companies  has  been  assumed 
by  the  states  and  exercised  through  the  insurance  depart- 
ment. In  our  state  this  system  of  legislation  began  as  early 
as  1 810  and  it  has  grown  in  bulk  and  importance  with  the 
growth  of  business  and  the  development  of  the  resources  of 
the  state.  It  fixes  the  minimum  of  actual  capital  necessary 
to  the  organization  of  a  corporation  for  insurance  against 
fire,  on  the  stock  plan,  at  one  hundred  thousand  dollars.  It 
prohibits  the  division  of  profits  in  dividends  to  the  injury  of 
the  reserve  fund.  It  regulates  the  form  of  policy  and  re- 
quires the  application  to  be  attached  to,  or  made  part  of,  the 
policy.  It  requires  each  company  to  submit  detailed  state- 
ments of  the  business  done,  of  its  assets  and  liabilities,  and  to 
show  its  financial  condition.  It  requires  companies  organized 
under  the  laws  of  other  states  or  countries  to  make  certain 
deposits  in  this  state  to  secure  those  who  are  insured  by  them 
and  to  appoint  some  suitable  agent  on  whom  process  may 
be  served  in  actions  brought  against  them. 

These  regulations  have  been  made   from  time  to  time  as 


380  Trusts  for  Business  Purposes. 

[COMMONWEALTH   v.    VROO>IAN.] 

their  importance  has  been  felt  by  the  public.     They  are  all 
easy   of   enforcement   against   corporations.      Some   of   them 
cannot  be  enforced  against  private  persons  or  partnerships. 
As  a  matter  of  fact,  the  business  has  for  many  years  been 
left  to  the  corporations  and  regulations  made  to  affect  cor- 
porations have  therefore  met  fully  the  public  need.     At  this, 
time,  however,  private  capital  is  seeking  employment  in  this 
field  and  it  signalizes  its  entry  upon  the  field  by  a  denial  of 
the  power  of  the  state  over  it.     The  question  has  been  raised 
by  the  corporations   of  other  states,  but  I  recall  no  case  in 
which  it  has  been  raised  by  individuals.     In  Doyle  v.  Conti- 
nental Ins.  Co.  of  New  York,^*  the  Supreme  Court  of  the 
United   States   stated  the   general   rule  thus:     "A   state  has 
the  right  to  impose  conditions  not  in  confiict  with  the  Consti- 
tution of  the  United  States  on  the  doing  of  insurance  busi- 
ness within  its  territory  by  an  insurance  company  chartered 
by  another  state,  or  to  exclude  it  altogether." 

200 — Regulation  of  Business  under  Police  Power. 

It  would  seem  to  follow  logically  that  the  state  might  require 
all  persons  desiring  to  enter  upon  the  insurance  business  to 
comply  with  the  same  conditions,  and  if  necessary,  to  obtain  a 
charter  of  incorporation  in  order  to  meet  such  compliance.  An 
effort  is  made  to  distinguish  between  regulation  and  prohibition 
and  to  hold  that  the  Act  of  1870  is  a  prohibition  operating  upon 
all  natural  persons  for  the  benefit  of  corporations  who  are  thus 
given  an  oppressive  monopoly  of  the  business  of  insurance 
against  fire.  But  the  prohibition  is  only  such  as  is  necessary  to 
give  effect  to  the  regulation  which  the  act  prescribes.  The  act 
implies  a  declaration  by  the  legislature  that  the  business  of  in- 

64  94  U.  S.  535,  24  L.  Ed.  148. 


I  j! 


Busine;ss  and  Legisi^ation.  381 

[COMMONWEALTH   v.    ATROOMAN.] 

surance  against  fire  affects  so  many  persons  and  involves  such 
large  sums  of  money,  as  to  make  it  necessary  for  the  public 
protection  that  it  be  subjected  to  the  supervision  and  control 
of  the  government;  that  the  supervision  required  is  such  that 
private  persons  can  not  be  compelled  to  submit  their  business 
conduct  to ;  and  then  expressly  declares  that  all  persons  desiring 
to  embark  in  the  business  must  procure  a  charter  of  incorpora- 
tion for  that  purpose  because  corporations  are  subject  to  the 
supervision  and  control  of  the  state  that  creates  them.  This 
is  regulative.  It  directs  the  business  into  the  only  channel  that 
admits  the  necessary  measure  of  control  and  it  necessarily  pro- 
hibits the  business  outside  that  channel. 

The  traffic  in  intoxicating  drinks  is  regulated  by  law ;  but 
the  regulation  prohibits  absolutely  all  persons  from  engaging  in 
it  unless  they  have  first  secured  the  permission  of  the  state  by 
obtaining  a  Hcense  under  the  law.  Here,  as  in  the  Act  of  1870, 
we  find  permission  to  those  who  comply  with  the  regulation, 
and  prohibition  to  those  who  do  not.  The  practice  of  medicine, 
the  sale  of  drugs,  and  many  other  sorts  of  business  are  regu- 
lated by  law ;  but  the  regulation  would  be  without  effect  if  it 
did  not  include  a  prohibition  directed  against  those  not  qualified, 
and  enforce  it  with  suitable  penalties.  The  police  power  of  a 
state  may  be  exerted  for  the  complete  or  the  partial  control  of 
a  given  business.  It  may  prohibit  it  absolutely  to  all  persons 
for  the  purpose  of  suppression.  It  may  permit  it  to  some  per- 
sons under  certain  restrictions  in  order  to  secure  control  over  it 
and  hold  it  within  proper  bounds.^^  The  Sunday  laws,  the  laws 
against  gambling,  against  lotteries,  against  disorderly  houses, 
the  sale  of  liquors,  the  sale  of  oleomargarine,  the  sale  of  drugs 
and  many  similar  laws  afford  instances  of  the  exercise  of  the 

55  stone  V.  Mississippi,  101  U.    S.  814,  25  L.  Ed.  1079. 


382  Trusts  for  Business  Purposes. 

[COM3IONTV'EAL.TH    v.    VBOOIAN.] 

police  power  for  the  complete  suppression  of  a  given  line  of  em- 
ployment, or  for  its  restriction  and  control. 

The  Act  of  1870  belongs  to  the  latter  class.  It  does  not  pro- 
hibit the  business  of  insurance,  but  regulates  it.  It  says  to  all 
persons  interested:  'Tf  you  wish  to  embark  in  this  business 
you  must  secure  a  charter  of  incorporation  so  as  to  subject 
your  business  to  the  visitorial  power  of  the  state.  If  you 
will  not  do  this  you  must  not  engage  in  insurance  against  fire 
at  all."  This  is  not  prohibition  of  the  business,  for  the  business 
is  distinctly  authorized.  It  is  an  effort  to  bring  it  under  state 
supervision  and  control  by  requiring  all  who  wish  to  enter  the 
business  to  put  themselves  in  a  position  where  the  insurance 
legislation  of  the  state  will  reach  them  and  the  insurance  depart- 
ment of  the  state  can  supervise  their  business  and  compel  ob- 
servance of  the  law.  Without  going  further  into  the  discussion 
we  may  now  state  our  conclusions  applicable  to  the  case  before 
us: 

(i)  The  business  of  insurance  against  loss  by  fire  is,  by 
reason  of  its  magnitude,  its  importance  to  property  owners,  and 
the  nature  of  the  business,  a  proper  subject  for  the  exercise 
of  the  police  power  of  the  state. 

(2)  The  Act  of  1870  is  a  valid  exercise  of  the  police  power, 
it  does  not  prohibit  but  regulates  the  business.  It  excludes  no 
one  from  engaging  in  it,  but  prescribes  the  preliminary  qualifi- 
cation necessary  for  all  alike,  to  entitle  them  to  enter  the 
business.  ,(|i 

(3)  The  qualification  is  reasonable;  it  is  open  to  all  under 
general  laws ;  it  is  not  burdensome ;  its  only  effect  is  to  secure 
adequate  capital  at  the  beginning  and  state  supervision  during 
the  continuance  of  the  business. 

(4)  Upon  the  special  verdict,  judgment  should  have  been 
entered  in  favor  of  the  commonwealth  and  sentence  should  have 


Business  and  Legislation.  383 

[COMMONWEALTH    v.    ATIOOMAN.] 

been  pronounced  under  the  Act  of  1870.  That  this  may  now 
be  done,  the  judgment  is  reversed,  the  record  remitted  and  a 
procedendo  awarded." 

201 — Corporations  with  Exclusive  Privileges  are  Monopolies. 

In  the  two  preceding  cases  the  doctrine  is  laid  down  that  the 
legislature  may  prohibit  individuals  as  such  from  engaging  in 
the  business  of  banking  and  insurance.  The  theory  advanced 
and  the  one  relied  on  in  both  cases  is  that  the  state  may  regu- 
late business  of  this  character.  The  power  of  the  state  to  regu- 
late is  undisputed;  but  when  the  state  grants  to  corporations 
the  exclusive  privilege  to  carry  on  certain  business  under  the 
guise  of  regulation,  an  entirely  different  question  is  presented. 
It  has  been  said  that  legislation  of  this  character  is  unconstitu- 
tional for  the  reason  it  creates  a  monopoly  in  a  certain  class — 
regulation  should  not  be,  but  is  in  fact,  prohibition.  This  tenet 
is  given  in  a  dissenting  opinion  in  the  cases  of  Commonwealth 
V.  Vrooman,  supra,  and  State  v.  Scougal.^^  In  substance,  the 
dissenting  opinion  in  the  former  case  is  as  follows : 

The  Act  of  the  4th  of  February,  1870,  declares  it  to  be  a 
misdemeanor  for  any  person  to  issue  a  policy  of  insurance 
against  loss  by  fire  or  lightning,  without  authority  being  ex- 
pressly conferred  so  to  do  by  a  charter  of  incorporation  issued 
according  to  law. 

On  the  1 2th  of  March,  1894,  the  defendant  issued  a  policy  to 
James  G.  Kimball  in  the  sum  of  $1,000  indemnifying  him 
against  loss  by  fire  on  his  household  furniture  contained  in  his 
dwelling  house  in  Philadelphia,  without  authority  expressly 
conferred  by  an  act  of  incorporation.     For  so  doing,  he  was 

66  3    S.   D.    55,   51   N.   W.   858,      15  L.  R.  A.  477,  44  Am.  St.  Rep. 

756. 


384  Trusts  for  Business  Purposes. 

[commonwealth  v.  ^tioosian.] 

indicted  and  tried  March  20,  1894.  There  was  no  dispute  as 
to  the  facts,  and  the  jury  in  a  special  verdict  found  them  as 
stated.  The  court,  being  of  opinion  the  act  was  unconstitu- 
tional, entered  judgment  on  the  verdict  for  defendant  and  there- 
upon the  commonwealth  appealed. 

Unquestionably,  the  legislature  has  the  authority  to  enact  any 
law  not  in  conflict  with  the  constitution  of  the  state  or  of  the 
United  States.  The  right  to  limit  the  transaction  of  the  business 
of  fire  insurance  to  incorporated  associations  is  not  in  express 
terms,  forbidden.  But  the  right  of  natural  persons  to  make 
contracts  of  indemnity  against  loss  by  fire  or  shipwreck  was, 
for  centuries  before  the  adoption  of  the  Constitution,  a 
common-law  right.  All  the  authorities,  without  a  single  excep- 
tion, hold  that  under  the  constitutional  right  to  acquire,  possess, 
and  protect  property,  there  is  necessarily  included  the  right  to 
make  reasonable  contracts  concerning  it,  which  contracts  are 
protected  by  the  Constitution.  In  this,  all  agree.  And  all 
agree,  further,  that  the  legislature  may,  in  the  exercise  of  its 
police  power,  absolutely  forbid  contracts  which  are  inimical  to 
public  interests ;  and  may  adopt  suitable  regulations  of  contracts 
for  the  protection  of  the  public. 

The  business  of  fire  insurance  being  one  which,  from  its 
nature,  involves  contracts  with  large  numbers  of  persons  in 
all  parts  of  the  commonwealth  who  have  not  the  opportunities 
of  gaining  the  information  necessary  to  intelligent  bargaining 
for  their  better  security,  the  legislature  may  make  such  regula- 
tions as  will  protect  them  against  fraud  or  imposition.  It  may 
require  that  all  who  desire  to  transact  business  with  the  public 
shall  take  out  a  license,  shall  make  frequent  reports  of  their 
financial  condition,  have  fixed  places  of  business  where  service 
of  process  can  be  had  on  them;  that  they  shall  deposit  with 
the  treasurer  or  other  officer  of  the  commonwealth,  bonds  or 


Business  and  Legislation.  385 

[COMMONWEALTH    v.    VBOOSIAN.] 

Other  securities  in  sufficient  amount  to  guarantee  those  with 
whom  they  contract  against  loss;  and  generally,  may  make  all 
reasonable  rules  for  the  regulation  of  such  business.  But  can 
the  legislature  absolutely  forbid  the  making  of  such  a  contract 
by  individuals,  and  confer  on  corporations  a  monopoly  of  such 
business  ? 

Is  the  business  of  fire  insurance  deleterious  to  the  public? 
If  so,  the  legislature  may  absolutely  prohibit  it.  But  no  one 
contends  that  it  is.  On  the  contrary,  it  is  admitted  it  is  to  the 
advantage  of  the  public.  The  legislature  admits  this  by  ex- 
pressly authorizing  artificial  persons  to  conduct  it.  If  such 
contracts  be  not  injurious  to  the  public,  and  may  not  be  alto- 
gether prohibited,  then  where  is  the  authority  to  prohibit  one 
class — natural  persons — from  entering  into  them,  and  specific- 
ally empowering  another  and  numerically  a  very  much  smaller 
class — ^artificial  persons — ^to  make  them?  In  so  doing  the  state 
grants  a  monopoly  in  a  particular  business  to  a  particular  class. 

As  is  said  in  substance  in  the  slaughter-house  cases^'''  and 
many  other  cases,  "all  such  grants  relating  to  any  known  trade 
have  been  held  by  all  the  judges  of  England  to  be  void  at  com- 
mon law  as  destroying  the  freedom  of  trade,  discouraging  labor 
and  industry,  restraining  persons  from  getting  an  honest  liveli- 
hood, and  putting  it  in  the  power  of  the  grantees  to  enhance  the 
price  of  commodities." 

A  contract  of  indemnity  against  loss  by  fire,  being  a  common- 
law  right,  cannot  by  legislative  grant  be  monopolized  by  a  small 
class,  unless  it  has  become  of  such  public  concern  as  requires 
its  exercise  by  the  state  or  by  a  corporation  to  whom  the  state's 

67  83  U.  S.  16  Wall.  102,  21  L.      lor  v.  Blatchford,  13  Allen  372, 
Ed.   417;    Alger   v.   Thacher,    19      90  Am.  Dec.  203. 
Pick.  54,  31  Am.  Dec.  119;   Tay- 


386  Trusts  for  Business  Purposes. 

[COMMONWEALTH    v.    VROOJIAN.] 

power  is  i immediately  delegated.  It  may  be  admitted  that  the 
business  of  constructing  and  operating  public  highways  for  the 
carriage  of  goods  and  travelers  is  exclusively  in  the  state  and 
is  of  such  immediate  public  interest  that  it  can  be  transacted 
only  by  the  state  and  such  corporations  as  the  state  may  spe- 
cially authorize.  But,  to  carry  on  this  business  at  all,  involves 
a  right  of  eminent  domain  which  the  state  alone  can  exercise  or 
grant  and  therefore  it  ought  not  to  be  exercised  by  private  in- 
dividuals. There  is  not,  and  never  was,  a  right  in  the  individual 
to  take  private  property  for  the  construction  and  operation  of 
a  public  highway  on  which  to  conduct  for  profit  the  business  of 
transportation;  but  there  was  never  a  time  that  the  individual 
had  not  the  right  to  make  a  contract  to  indemnify  his  fellow 
against  loss  by  fire.  This  act  is  not  obnoxious  to  the  constitu- 
tion because  it  authorizes  corporations  to  insure  against  fire, 
but  because  it  prohibits  individuals  doing  a  like  business.  It 
grants  a  monopoly  of  a  particular  business  to  a  particular  class ; 
prohibits  all  others  from  engaging  in  it.  This  the  legislature 
may  in  the  exercise  of  its  police  power  in  some  cases  do,  it  may 
declare  that  females  shall  not  be  employed  in  some  avocations ; 
that  children  under  a  certain  age  shall  not  be  employed  in  mines 
or  factories ;  that  none  but  men  of  good  repute  shall  sell  liquor 
by  retail ;  and  the  wisdom  of  such  legislation  is  not  a  question 
which  the  courts  can  consider,  for  it  is  adopted  to  promote  the 
health,  morals,  and  good  order  of  the  public. 

202 — Issuing  Banknotes  not  a  Private  Right. 

That  in  some  of  the  states  the  legislature  has  restricted  the 
business  of  banking  to  corporations,  has  no  analogy  to  the  case 
in  hand.  The  banking  intended  to  be  restricted  by  the  New 
York  act  was  issuing  of  notes,  receiving  of  deposits  and  dis- 


i 


Business  and  Legislation.  387 

[COMMONWEALTH    v.    \TlOOMAN.] 

counting.  In  People  v.  Utica  Ins.  Co.,^^  it  was  held  that  the 
act  was  only  a  restraining  and  regulating  act  applying  to  asso- 
ciations of  individuals ;  that  as  to  them,  to  do  a  banking  busi- 
ness, they  must  have  corporate  authority ;  that  an  individual 
was  not  prohibited  from  doing  a  banking  business  except  as  to 
issuing  bank  notes.  It  has  always  been  held  to  be  within  the 
police  power  of  the  legislature  to  restrict  the  issuing  of  notes 
intended  to  pass  as  money,  to  corporations.  It  is  a  matter 
which  concerns  the  entire  public  who  have  no  opportunity  in 
the  hurry  of  every-day  business  transactions  of  life  to  ascertain 
the  value  of  the  promise  which  is  tendered  as  money.  But  in 
a  contract  of  indemnity,  why  should  not  the  citizen  make  his 
contract  when  and  where  the  price  and  security  suits  him  best  ? 
Why  should  the  legislature  take  from  the  whole  people  their 
common-law  right  of  contract  for  insurance  and  grant  it  to  a 
particular  class?  Where  is  there  the  semblance  of  the  constitu- 
tional exercise  of  the  police  power  in  this? 

Under  the  Corporation  Act  of  1874  and  supplements,  cor- 
porations for  almost  every  business  are  authorized,  such  as  sup- 
plying ice,  printing  and  publishing,  conducting  hotels,  drove- 
yards  livery-stables,  lumbering,  quarrying,  mining,  brewing, 
distilling,  improvement  and  sale  of  real  estate.  In  fact,  almost 
every  kind  of  business  can  be  transacted  by  incorporated  com- 
panies. All  concern  the  public.  If  this  act  be  constitutional, 
the  legislature  can  prohibit  the  transaction  of  any  business  if 
not  conducted  by  corporations  under  the  Act  of  1874,  and 
under  the  pain  of  imprisonment,  forbid  the  individual  engaging 
in  any  business  whatever. 

203 — Exclusive  Grant  to  a  Class  is  Prohibition,  not  Regulation. 

It  is  paternalism  to  assume  that  citizens  are  incapable  of  pru- 

68 15    Johns.    358,    8    Am.    Dec.      Johns.  205. 
243;      Briston     v.     Barker,     14 


388  TruSio  r'OR  Business  Purposes. 

rCOMMONWEALTH    v.    VBOO>IAN.] 

dently  contracting  with  reference  to  their  property  without  an 
express  grant  of  the  state  in  the  shape  of  corporate  franchise 
to  one  of  the  contracting  parties.  It  is  an  assumption  that  the 
citizen  is  a  child,  needing  the  tutelage  and  protection  of  the 
legislature  in  the  ordinary  affairs  of  business  life  or  else  it  is 
a  species  of  tyranny  in  government  like  that  of  Turkey  where 
the  rights  to  produce,  manufacture  and  trade  are  all  the  subject 
of  grant  from  the  sultan.  If  the  exercise  of  the  right  to  con- 
tract to  indemnif}^  be  injurious  to  the  public  then  it  ought  to  be 
prohibited;  if  beneficial,  it  ought  not  to  be  monopolized  by  a 
few. 

The  rule  to  be  educed  from  Budd  v.  New  York,^^  and  all  the 
cases  where  the  police  power  of  the  state  is  discussed,  is  that 
while  a  business  affected  by  a  public  interest  may  be  regulated, 
yet  when  not  inimical  to  the  health,  morals,  or  safety  of  the 
people,  it  can  not  be  prohibited.  I  do  not  think  an  exclusive 
grant  to  a  class  is  regulation;  that  is  prohibition  of  all  others 
and  is  therefore  unconstitutional.  The  judgment  in  my  opinion 
should  be  affirmed  and  the  appeal  dismissed.  Sterret,  Ch.  J., 
and  Green,  J.,  concur  in  this  dissent. 

204 — Banking  Act  of  South  Dakota. 

In  the  case  of  Weed  v.  Bergh,  supra,  the  Supreme  Court  of 
Wisconsin  upheld  the  banking  act  of  that  state  in  its  provision 
which  excluded  the  individual  as  such  from  engaging  in  that 
business;  in  opposition  to  this  opinion  the  Supreme  Court  of 
South  Dakota  declared  its  banking  act  unconstitutional  as  it 
sought  to  exclude  the  individual  as  such  from  engaging  in  the 
banking  business  in  that  state.     This  principle  is  set  forth  in 

69  143  U.  S.  523,  36  L.  Ed.  250.      S.  700,  25  L.  Ed.  496. 
The   Sinking-Fund  Cases,   99   U. 


Business  and  LkgisIvATion.  389 

rSTATE    V.    SCOUGAL.] 

the   case  of   State  of   South  Dakota  v.   Scougal^°  and  is  as 
follows : 

This  case  comes  before  us  on  a  writ  of  error  issued  on  be- 
half of  the  state  to  the  County  Court  of  Yankton  County  to 
review  the  judgment  of  that  court  sustaining  a  demurrer  to  the 
information  filed  against  the  defendant  in  error,  and  quashing 
the  same.  The  legislature  of  this  state  at  its  last  session  passed 
an  act  for  the  organization  of  state  banks  entitled,  'An  Act  to 
Provide  for  the  Organization  and  Government  of  State  Banks,' 
approved  March  10,  1891,  and  constitutes  chapter  27  of  the 
Laws  of  1891. 

The  first  section  of  the  Act  is  as  follows :  "Associations  for 
carrying  on  the  business  of  banking  under  this  title  may  be 
formed  by  any  number  of  natural  persons — not  less  than  three 
— one-third  of  whom  shall  be  residents  of  the  state.  They 
shall  enter  into  articles  of  association  which  shall  specify  in 
general  terms  the  object  for  which  the  association  is  formed, 
and  may  contain  any  other  provisions  not  inconsistent  with 
law  which  the  association  may  see  fit  to  adopt  for  the  regula- 
tion of  its  business  and  the  conduct  of  its  affairs.  These  ar- 
ticles shall  be  signed  by  the  persons  uniting  to  form  the  associa- 
tion and  a  copy  of  them  shall  be  forwarded  to  the  secretary  of 
state  of  the  state  of  South  Dakota."  The  second  section  pro- 
vides what  the  certificate  of  incorporation  shall  contain,  and 
the  third  section  provides  for  the  manner  of  its  execution,  filing, 
etc.  The  fourth  section  confers  upon  such  corporations  or 
associations  the  following  powers:  (i)  to  adopt  and  use  a 
corporate  seal;  (2)  to  have  succession  for  twenty  years;  (3)  to 
make  contracts;  (4)  to  sue  and  be  sued;  (5)  to  elect  officers 
and  prescribe  their  duties;  (6)  to  make  by-laws  to  govern  and 

60  3  S.  D.  55,  51  N.  W.  858,  15      L.   R.   A.    477,   44   Am.    St.   Rep. 

756. 


390  Trusts  for  Business  Purposes. 

[STATE    V.    SCOUGAIi.l 

control  the  business;  and  (7)  "to  exercise  by  its  board  of  di- 
rectors or  duly  authorized  officers  or  agents,  subject  to  law,  all 
such  incidental  powers  as  shall  be  necessary  to  carry  on  the 
business  of  banking  by  discounting  and  negotiating  promissory 
notes,  bills  of  exchange,  drafts  and  other  evidences  of  debt,  by 
receiving  deposits,  by  buying  and  selling  exchange,  coin,  and 
bullion,  by  loaning  money  on  personal  security." 

Section  2"]  provides  as  follows :  "It  shall  be  unlawful  for 
any  individual,  firm  or  corporation  to  continue  to  transact  a 
banking  business  or  to  receive  deposits  for  a  period  longer 
than  six  months  immediately  after  the  passage  and  approval  of 
this  Act,  without  first  having  complied  with  and  organized  un- 
der the  provisions  of  this  Act.  Any  person  violating  the  pro- 
visions of  this  section,  either  individually  or  as  an  interested 
party  in  any  association  or  corporation,  shall  be  guilty  of  a  mis- 
demeanor and  on  conviction  thereof,  be  fined  not  less  than  five 
hundred  dollars  nor  more  tlian  one  thousand  dollars,  or  im- 
prisonment in  the  county  jail  not  less  than  ninety  days  or 
either  or  both,  at  the  discretion  of  the  court."'  These  are  all 
the  provisions  of  the  law  that  it  is  necessary  to  give  to  a  proper 
understanding  of  the  questions  presented  for  our  decision. 

On  the  22nd  day  of  September,  1891,  the  state's  attorney 
filed  an  information  against  the  defendant  in  error  in  the 
county  court  of  Yankton  county  containing  eleven  coimts, 
charging  him  in  the  various  counts  with  carrying  on  the  busi- 
ness of  banking  "by  discounting  and  negotiating  promissory 
notes,  bills  of  exchange,  drafts,  and  other  evidences  of  debt, 
by  receiving  deposits,  by  buying  and  selling  exchange  coin, 
bullion,  by  loaning  money  on  personal  property,"  without  hav- 
ing complied  with  the  provisions  of  the  Banking  Act.  A  de- 
murrer was  interposed  to  each  count  of  the  information  on  the 
ground  that  it  did  not  state  facts  sufficient  to  constitute  a  public 


Business  and  Legislation.  391 

[STATE    V.    SCOUGAL.] 

offense.  The  demurrer  was  sustained  by  the  county  court,  and 
judgment  rendered  quashing  the  information.  The  principal 
ground  rehed  on  to  sustain  the  demurrer  and  judgment  of  the 
court  below  is  the  unconstitutionality  of  section  27  of  the  Act 
under  which  the  information  was  filed,  and  this  presents  the 
only  question  we  shall  discuss  or  consider  as  the  other  objec- 
tions to  the  information  were  purely  technical  and,  in  our  opin- 
ion, are  without  merit. 

The  learned  attorney-general  contends :  first,  that  the  priv- 
ilege of  banking  is  or  may  be  made  by  the  legislature  a  fran- 
chise, and  as  such,  is  subject  to  the  control  of  the  legislature  of 
the  state,  and  that  it  being  a  franchise,  or  made  such,  the  legis- 
lature has  the  power  of  conferring  upon  or  granting  the 
privilege  to  such  persons,  associations,  and  corporations  as  it 
may  deem  proper,  and  of  excluding  all  other  persons  from  the 
exercise  of  such  privilege ;  and  second,  if  the  privilege  of  bank- 
ing is  not  a  franchise  and  can  not  be  made  such  by  the  legisla- 
ture, then  the  legislature  by  virtue  of  the  police  power  vested  in 
the  state,  may  regulate  the  business  and  may  under  such  power, 
prescribe  the  manner  in  which  the  business  shall  be  conducted 
and  may  exclude  all  persons  from  exercising  the  privilege  of 
banking,  except  in  the  manner  prescribed  by  the  law. 

The  learned  counsel  for  the  defendant  in  error  contend :  first, 
that  only  banking  privilege  proper,  namely :  the  privilege  of  is- 
suing demand  notes  to  circulate  as  money,  or  as  defined  in  the 
state  constitution :  the  power  "to  issue  bills  or  paper  credit  de- 
signed to  circulate  as  money,"  constitutes,  or  can  by  legislative 
power  be  made,  a  franchise,  and  that  carrjang  on  a  banking  busi- 
ness by  exercising  the  incidental  powers  of  banking  specified  in 
subdivision  7  of  section  4  of  the  Act,  is  a  right  belonging  to  the 
citizens  of  the  country  generally,  and  not  a  franchise,  and  can 
not  be  made  such  by  legislative  power.     Second :    that  under 


392  Trusts  for  Business  Purposes. 

[STATE    V.    SCOUGAL.l 

the  police  power  vested  in  the  state,  the  legislature  niay  regulate, 
but  it  can  not  prohibit  or  destroy,  a  business,  calling,  or  occu- 
pation not  necessarily  offensive  to  the  senses,  injurious  to  the 
health,  or  otherwise  detrimental  to  the  public  interest;  that  it 
is  only  trades,  occupations,  and  pursuits  that  are  at  all  times, 
and  under  all  circumstances,  necessarily  offensive  to  the  com- 
munity, or  injurious  to  societ}',  that  can  be  absolutely  prohibited 
by  legislative  action ;  and  that  as  the  business  of  banking  is  not 
of  this  character,  the  legislature  can  not  prohibit  individuals 
from  pursuing  it,  though,  like  all  other  classes  of  business,  it 
may  be  regulated.  And,  third :  they  further  contend  that  the 
Act  conflicts  with  sections  i,  2,  and  18  of  article  6  of  the  state 
constitution  and  section  i,  article  14  of  the  Constitution  of  the 
United  States,  in  that  the  law  makes  an  unjust  discrimination 
in  granting  privileges  and  immunities  to  citizens,  classes,  and 
corporations  which  upon  the  same  terms  are  not  open  to  all,  in 
that  the  law  and  particularly  section  27,  is  an  unlawful  inter- 
ference with  the  liberty  and  property  of  the  citizen,  in  that  it 
discriminates  against  the  individual  citizen  by  conferring  upon 
corporations  the  right  to  transact  a  banking  business  and  pro- 
hibiting the  same  privilege  to  such  individual  citizen;  and  in 
that  the  Act  deprives  the  individual  citizen  of  his  right  to  pur- 
sue a  lawful  calling,  occupation,  or  business  which  is  inoffensive 
and  not  injurious  to  the  community. 

205 — Franchise  Distinguished  from  a  Right. 

Are  the  incidental  powers  of  banking  conferred  upon  cor- 
porations by  subdivision  7  of  section  4  franchises  or  has  the 
legislature  power  to  make  them  such,  and  to  prohibit  individual 
citizens  from  exercising  them?  What  is  a  franchise?  Black- 
stone  defines  it  as  a  "royal  prerogative  or  branch  of  the  king's 


Business  and  Legislation.  393 

[STATE    T.    SCOUGAL.l 

prerogative,   subsisting  in  the  hands  of  a  subject.''^!     Chiei 
Justice  Taney  defines  them  as  follows  :    "Franchises  are  special 
privileges  conferred  by  government  upon  individuals,  which  do 
not  belong  to  citizens  of  the  country  generally  by  common  right. 
It  is  essential  to  the  character  of  a  franchise  that  it  should  be 
a  grant  from  the  sovereign  authority  and  in  this  country  no 
franchise  can  be  held  which  is  not  derived  from  the  law  of  the 
state.62     The  qualification  by  the  chief  justice,   "which  does 
not  belong  to  the  citizens  of  the  country  generally  by  common 
right,"  is  an  important  one,  and  constitutes  the  distinguishing 
feature  of  a  franchise.    What  is  meant  by  this  qualification  is 
made  clear  by  Mr.  Justice  Bradley  in  a  recent  case  decided  by 
the  Supreme  Court  of  the  United  States.     After  quoting  the 
above  definition  of  a  franchise  given  by  Blackstone,  he  says: 
"No  private  person  can  establish  public  highway,  public  ferry, 
or  railroad,  or  charge  tolls  for  the  use  of  the  same,  without  au- 
thority from  the  legislature,  direct  or  derived.    These  are  fran- 
chises.    No  person  can  take  another's  propert}',  even  for  public 
use,  without  such  authority,  which  is  the  same  as  to  say  that  the 
right  of  eminent  domain  can  be  exercised  only  by  virtue  of  a 
legislative  grant.     This  is  a  franchise.     No  persons  can  make 
themselves  a  body  politic  without  legislative  authority;   cor- 
porate capacity  is  a  franchise."^^ 

Of  course,  as  the  learned  judge  says,  this  list  might  be  con- 
tinued indefinitely,  but  this  quotation  clearly  illustrates  the 
nature  of  a  franchise.  Over  all  public  property,  highways, 
navigable  rivers  and  seas,  over  everything  that  belongs  to  the 
sovereign,  the  power  of  the  government  is  absolute,  whether 

61  2  Bl.  Com.  37.  63  California    v.    Central    Pac. 

62  Bank  of  Augusta  v.  Earle,  R.  Co.,  127  U.  S.  40,  32  L.  Ed. 
38  U.  S.  13,  Pet.  595,  10  L.  Ed.      157. 

311. 


394  Trusts  for  Business  PuRPOsi;s. 

rSTATE    V.    SCOUGAL.] 

that  power  is  derived  from  the  common  law  or  from  the  state 
or  the  national  Constitution.  When,  therefore,  the  state  grants 
a  right  thus  belonging  to  the  government  and  not  to  the  citizens 
generally  as  a  matter  of  right,  it  is  the  grant  of  a  franchise. 
But  at  common  law,  banking  in  all  its  branches  was  free  to 
all,  and  belonged  to  the  citizens  of  the  country  generally. 

206 — Privilege  to  Issue  Currency  is  a  Franchise. 

In  1694  the  British  parHament  chartered  the  Bank  of  Eng- 
land and  conferred  upon  that  bank  the  power  to  issue  demand 
notes  to  circulate  as  money  and  prohibited  large  copartnerships 
and  associations  from  issuing  such  notes.  By  our  national  Con- 
stitution the  power  to  regulate  the  currency  was  conferred  upon 
the  national  government.  On  the  argument  of  the  case  of 
Bank  of  Augusta  v.  Earle,  supra,  Mr.  Webster,  in  the  course  of 
his  argument,  after  giving  the  history  of  banking  in  England 
and  in  this  country,  said:  "So  that  the  banking  privilege  of 
the  Bank  of  England  consisted  simply  in  the  privilege  of  issu- 
ing notes  for  circulation,  while  the  privilege  is  forbidden  to  all 
other  corporations  and  all  large  copartnerships  or  associations." 
And  in  defining  banking  powers  properly  belonging  to  a  bank 
he  said :  "What  is  that,  then,  without  which  any  institution  is 
not  a  bank,  and  with  which  it  is  a  bank?  It  is  the  power  to 
issue  promissory  notes  wath  a  view  to  their  circulation  as 
money." 

It  has  long  been  settled  in  this  country  that  the  privilege  of 
issuing  demand  notes  to  circulate  as  money  was  a  franchise — a 
public  right — belonging  to  the  national  government,  that  might 
be  granted  by  congress  to  individuals  or  corporations,  and  when 
not  exercised  by  the  national  government,  be  exercised  by  the 
state  governments.    In  an  early  case  before  the  Supreme  Court 


Business  and  Legislation.  395 

rSTATE    V.    SCOUGAL.] 

of  the  United  States,  Mr.  Justice  Story,  in  a  dissenting  opinion, 
said:  "The  states  may  create  banks  as  well  as  other  corpora- 
tions upon  private  capital,  and  so  far  as  this  prohibition  is  con- 
cerned (the  prohibition  against  emitting  bills  of  credit  by  the 
sale)  may  rightfully  authorize  them  to  issue  bank  bills  or  notes 
as  currency,  subject  always  to  the  control  of  congress  whose 
powers  extend  to  the  entire  regulation  of  the  currency  of  the 
country."^*  This  view  of  the  power  of  the  national  govern- 
ment to  regulate  and  to  provide  a  national  currency  and  grant 
the  privilege  to  corporations  and  to  prohibit  all  not  authorized 
to  exercise  the  franchise,  was  affirmed  by  the  United  States 
Supreme  Court  in  Veazie  Bank  v.  Fenno^^  wherein  the  chief 
justice  in  delivering  the  opinion  of  the  court  says:  "Having 
thus,  in  the  exercise  of  undisputed  constitutional  powers,  under- 
taken to  provide  a  currency  for  the  whole  country,  it  can  not  be 
questioned  that  congress  may,  constitutionally,  secure  the  benefit 
of  it  to  the  people  by  appropriate  legislation.  To  this  end,  con- 
gress has  denied  the  quality  of  legal  tender  to  foreign  coins, 
and  has  provided  by  law  against  the  imposition  of  counterfeit 
and  base  coin  on  the  community.  To  the  same  end,  congress 
may  restrain  by  suitable  enactments,  the  circulation  as  money 
of  any  notes  not  issued  under  its  own  authority.  Without  this 
power,  indeed,  its  attempts  to  secure  a  sound  and  uniform  cur- 
rency for  the  country  must  be  futile."  When,  therefore,  bank- 
ing is  said  to  be  a  franchise,  it  must,  we  think,  be  understood 
as  referring  to  the  privilege  of  issuing  demand  notes  to  circu- 
late as  currency.  Judge  Cooley,  in  speaking  of  bank  currency, 
in  a  note  to  Cooley's  Blackstone,  says :     "These  securities  are 

64  Briscoe  v.  Bank  of  Common-  65  75  U.  S.  8  Wall.  533,  19  L. 

wealth  of  Kentucky,  36  U.  S.  11,      Ed.  482. 
Pet.  257,  349,  9  L.  Ed.  709,  745. 


396  Trusts  for  Business  Purposes. 

ESTATE    V.    SCOCGAL.] 

designed  to  circulate  as  money  and  they  are  not  allowed  to  be 
issued  except  by  persons  duly  authorized  by  statute. "^^ 

"Banking  powers"  when  used  in  state  constitutions,  have 
been  construed  by  several  state  courts  to  mean  the  power  to 
issue  notes  to  circulate  as  money.  It  is  provided  by  the  con- 
stitution of  the  state  of  Ohio  that  "no  action  of  the  General 
Assembly  authorizing  associations  with  banking  powers  shall 
ever  take  effect,"  etc.,  until  submitted  to  a  vote  of  the  people. 
The  supreme  court  of  that  state  in  a  late  case  says :  "The  stat- 
ute in  question  does  not  assume  to  authorize  the  making  or 
issuing  of  bills  or  notes  to  circulate  as  money,  and  the  question 
is  submitted  for  our  determination  whether  it  is  within  the 
meaning  of  the  constitution."  After  an  able  discussion  of  the 
question,  the  court  concludes  that  the  phrase  "associations  with 
banking  powers"  relates  only  to  banks  of  issue.^'  The  same 
view,  was  taken  of  the  clause  "with  banking  powers"  in  the 
constitution  of  Illinois  ;^^  to  the  same  effect  is  the  decision  of 
the  Kansas  Supreme  Court  as  to  the  term  "banks  and  cur- 
rency."^^  Mr.  Chief  Justice  Taney  in  Bank  of  Augusta  v. 
Earle,  supra,  commenting  on  the  case  State  v.  Stebbins'"  says : 
"We  are  fully  satisfied  that  the  state  never  intended  by  its  con- 
stitution to  interfere  with  the  right  of  purchasing  and  selling 
bills  of  exchange,  and  that  the  opinion  of  the  court  does  not 
refer  to  transactions  of  this  description  when  speaking  of  bank- 
ing as  a  franchise." 

We  conclude  our  quotations  as  to  the  meaning  of  the  term 

66  2  Cooley's  Bl.  Com.  469,  note  68  People  v.  Loewenthal,  93 
21.  111.  191. 

67  Dearborn  v.  North  Western  69  Pape  v.  Capitol  Bank  of 
Sav.  Bank,  42  Ohio.  St.  617,  51  Topeka,  20  Kan.  440,  27  Am.  Rep. 
Am.   Rep.   851.  183. 

70  1   Stew    (Ala.)    312. 


Business  and  Legislation.  397 

rSTATE    V.    SCOUGAL.] 

franchise  as  applied  to  banking  powers,  by  a  reference  to  our 
own  Constitution.     All  the  provisions  referring  to  banking  in 
that  instrument  are  contained  in  article  18,  and  embrace  three 
sections.     The  first  is  as  follows :     "If  a  general  banking  law 
shall  be  enacted,  it  shall  provide  for  the  registry  and  counter- 
signing by  an  officer  of  this  state  of  all  bills  or  paper  credit 
designed  to  circulate  as  money,  and  require  security  to  the  full 
amount  thereof  to  be  deposited  with  the  state  treasurer  in  the 
approved  securities  of  the  state  or  of  the  United  States,  to  be 
rated  at  ten  per  centum  below  their  par  value;  and  in  case  of 
their  depreciation,  the  deficiency  shall  be  made  good  by  de- 
positing additional  securities."     The  second  section  hmits  the 
term  of  the  duration  of  state  banks  and  section  3  defines  the 
liability  of  stockholders.    It  will  be  observed  that  the  only  bank- 
ing power  referred  to  in  the  article  is  the  power  of  issuing  "bills 
or  paper  credit  designed  to  circulate  money."    This,  then,  is  the 
only  banking  power  made  a  franchise  under  our  constitution. 
All  the  other  or  incidental  powers  of  banking  are  left  to  citizens 
as  held  by  them  at  common  law.     And  it  may  be  proper  to 
observe  that  in  neither  the  charter  granted  by  the  British  parlia- 
ment to  the  Bank  of  England,  nor  in  the  National  Banking  Law 
of  the  United  States,  is  there  any  prohibition  of  the  privilege  of 
carrying  on  the  business  of  banking,  other  than  issuing  demand 
notes  to  circulate  as  money  by  any  individual,  copartnership  or 
corporation.     These  are  all  left  free  to  pursue  the  business  of 
banking  as  specified  in  section  27  of  the  Act  under  considera- 
tion.    No  one  will,  we  apprehend,  controvert  the  proposition 
that  under  the  common  law,  banking  in  all  its  branches,  was 
absolutelv  free  to  all. 


398  Trusts  for  Business  Purposes. 

[STATE    V.    SCOUGAL.] 

207 — Citizens  Have   Rights   Which   the   Sovereign   May  Not 
Usurp  by  Franchise. 

We  have  seen  in  what  manner  and   when  the  privilege  of 
issuing  bank-bills  to  circulate  as  money  became  a  franchise  in 
this  country ;  but  as  to  the  other  or  incidental  powers  of  bank- 
ing specified  in  subdivision  7,  section  4,  we  are  unable  to  find 
that  they  ever  became,  either  at  common  law  or  under  the  state 
or  national  Constitution,  a  franchise.    These  are  privileges  that 
always  belonged  to  the  citizens  of  the  country  generally.    They 
never  belonged  to  the  sovereign,  or  pertained  to  sovereignty  in 
any  manner.     They  have  never  been  conferred  upon  the  na- 
tional government  or  the  state  government.    Whence,  then,  did 
the  legislature  of  this  state  derive  its  power  to  farm  out  these 
privileges  to  corporations,  and  to  deny  to  the  individual  citizen 
the  right  to  exercise  them  which  he  and  his  ancestors  have  from 
time  immemorial  possessed?    Can  the  legislature  create  a  fran- 
chise by  depriving  citizens  of  their  rights,  and  then  bestow  it 
upon  another  at  will?    If  it  can,  then  the  citizen  lias  no  rights 
that  may  not  be  taken  from  him  under  this  new  theory  of  a 
franchise  created  by  the  legislature.     Concede  to  the  legislature 
the  right  to  make  the  incidental  powers  of  banking  a  franchise, 
under  what  principle  of  law  can  it  be  deprived  of  the  power 
of  making  merchandising,  blacksmithing,  or  farming,  a  fran- 
chise and  conferring  the  privilege  upon  corporations  only  ?     In 
our  opinion,  no  such  power  exists  in  the  legislature  as  that  of 
creating  a  franchise  out  of  the  natural  and  common  rights  of 
the  citizens.     It  must  derive  such  power  from  the  royal  pre- 
rogatives of  the  sovereign  of  that  country  from  whence  our 
system  of  law  is  taken,  or  from  the  state  or  national  Constitu- 
tion.   In  this  case  no  such  authority  is  shown. 

Hence  we  conclude  that  the  individual  citizen  can  not  be 


Business  and  Legislation.  399 

[STATE    V.    SCOUGAI..] 

deprived  of  a  right  always  possessed  by  him — of  conducting  a 
banking  business  and  exercising  all  the  privileges  of  banking 
except  that  of  issuing  currency— and  that  right  conferred  upon 
corporations  created  by  such  legislature  upon  the  theory  that 
such  a  privilege  is  a  franchise.  From  such  an  invasion  of  his 
rights  the  citizen  is  protected  by  the  Constitution  of  the  state. 
His  right  to  liberty  and  property  is  held  sacred  under  that  Con- 
stitution, and  unless  he  can  be  deprived  of  these  rights  by  the 
lawful  exercise  of  the  police  power  of  the  state,  the  prohibition 
contained  in  the  twenty-seventh  section  of  the  Act  is  unwar- 
ranted and  void.  These  constitutional  provisions  will  be  dis- 
cussed more  fully  under  the  third  proposition  of  counsel  for 
the  defendant  in  error. 

208 — Police  Power  Defined. 

This  brings  us  to  the  consideration  of  the  police  power  of 
the  state.  Is  it  competent  for  the  legislature,  under  that  power, 
to  deprive  the  individual  citizen  of  his  common-law  right  to 
carry  on  the  business  of  banking  by  discounting  paper,  buying 
and  selling  bills  of  exchange,  receiving  deposits  and  loaning 
money?  The  police  power  is  defined  by  Judge  Cooley  as  fol- 
lows :  "The  pohce  power  of  the  state  in  a  comprehensive  sense, 
embraces  the  whole  system  of  internal  regulations  by  which  the 
state  seeks  not  only  to  preserve  the  public  order  and  to  prevent 
offenses  against  the  state,  but  also  to  establish  for  the  inter- 
course of  the  citizen  with  citizens,  those  rules  of  good  manners 
and  good  neighborhood  which  are  calculated  to  pre^'ent  a  con- 
flict of  rights,  and  to  insure  to  each  the  uninterrupted  enjoyment 
of  his  own,  so  far  as  it  is  reasonably  consistent  with  a  like 
enjoyment  of  rights  by  others."''^^    This  power,  extending  as  it 

71  Cooley,  Const.  Lim.  706. 


400  Trusts  i^or  Business  Purposes. 

rSTATE    T.    SCOUGAL.] 

does  to  the  protection  of  life,  health,  comfort,  and  quiet  of  all 
persons,  and  the  protection  of  all  property  within  the  state,  is 
still  possessed  by  the  state,  subject  to  the  provisions  of  the 
constitutions,  state  and  national.  According  to  the  maxim — 
sic  utere  tuo  ut  alienum  non  laedas — it  must  be  within  the 
range  of  legislative  action  to  define  the  mode  and  manner  in 
which  one  may  so  use  his  own  rights  as  not  to  injure  others — ■ 
subject  to  the  provisions  of  the  constitutions,  state  and  national, 
and  to  those  great  fundamental  principals  enunciated  in  the 
Declaration  of  Independence. 

209 — Business  May  be  Regulated  but  not  Prohibited. 

But  under  this  power  it  is  not  competent  for  the  state  to  pro- 
hibit the  citizen  from  carrying  on  any  trade,  occupation  or  busi- 
ness that  is  not  offensive  to  the  community  or  injurious  to  so- 
ciety. The  business  may  be  regulated,  but  not  prohibited.  Mr. 
Tiedeman  in  his  excellent  work  on  the  Limitations  of  Police 
Powers,  says:  'Tn  order  to  prohibit  the  prosecution  of  the 
trade  altogether,  the  injury  to  the  public  which  furnishes  the 
justification  for  such  a  law  must  proceed  from  the  inherent 
character  of  the  business.  Where  it  is  possible  to  conduct  the 
business  without  harm  to  the  public,  all  sorts  of  police  regula- 
tions may  be  instituted  which  may  tend  to  suppress  the  evil. 
License  may  be  required,  the  most  rigid  system  of  police  regu- 
lations may  be  established,  and  heavy  penalties  may  be  im- 
posed for  the  infraction  of  the  law;  but  if  the  business  is  not 
harmful,  the  prosecution  of  it  can  not  rightfully  be  prohibited 
to  one  who  will  conduct  the  business  in  a  proper  and  circum- 
spect manner.  Such  a  one  "would  be  deprived  of  his  liberty 
without  due  process  of  law.'"'^'' 

72  Tiedeman  Pol.  Powers,  290. 


Business  and  Legisi^ation.  401 

[STATE    V.    SCOUGAL.] 

Again,  the  same  author  says :  "It  has  been  demonstrated  and 
satisfactorily  explained  in  its  application  to  a  sufficient  number 
of  parallel  and  similar  cases  in  order  to  lay  it  down  as  an  in- 
variable rule,  that  no  trade  can  be  subjected  to  police  regulation 
of  any  kind  unless  its  prosecution  involves  some  harm  or  in- 
jury to  the  public  or  third  persons,  and  in  any  case  the  regula- 
tion can  not  extend  beyond  the  evil  which  is  to  be  restrained. 
It  has  also  been  maintained,  and  I  think  satisfactorily  estab- 
lished, that  no  trade  can  be  prohibited  altogether  unless  the 
evil  is  inherent  in  the  character  of  the  trade,  so  that  the  trade, 
however  conducted,  and  whatever  may  be  the  character  of  the 
person  engaged  in  it,  must  necessarily  produce  injury  upon  the 
public  or  upon  individual  third  persons."'^  It  necessarily  fol- 
lows from  the  rules  above  laid  down  that,  if  a  business  is  of- 
fensive to  the  community,  or  injurious  to  society,  and  is  to  be 
prohibited,  it  must  be  prohibited  as  to  all.  If  it  is  regulated 
and  controlled,  it  must  be  so  regulated  and  controlled  as  to 
leave  the  business  or  calling  free,  under  such  restraints  as  the 
legislature  may  impose,  to  be  exercised  alike  by  all.  The  gov- 
ernment, under  the  guise  of  regulation,  can  not  prohibit  or  de- 
stroy. It  cannot  deprive  any  citizen  of  his  right  to  pursue  a 
calling,  occupation,  or  business,  not  necessarily  injurious  to  the 
community,  who  is  willing  to  comply  with  all  reasonable  regu- 
lations imposed  upon  it.  It  can  never  encroach  upon  the  liberty 
of  the  citizen  or  invade  the  rights  of  property  protected  by  the 
Constitution.'''* 

By  the  Act  in  question  the  state  admits  that  banking  is  not, 
of  itself,  injurious  to  the  community,  as  it  confers  upon  cor- 
porations that  may  be  organized  under  the  Act,  full  power  to 


73  Tiedeman  Pol.  Powers,  301.  74  In  Re  Jacobs,  98  N.  Y.  98, 

50  Am.  Rep.  636. 


402  Trusts  for  Business  Purposes. 

[STATE    V.    SCOUGAL.] 

carry  on  the  business  of  banking  as  provided  in  the  Act ;  and 
the  number  of  banking  corporations  that  may  be  organized  is 
not  Hmited.  It  also  permits  individual  citizens  in  towns  con- 
taining less  than  500  inhabitants  to  exercise  the  right  of  banl-:- 
ing,  as  specified  in  subdivision  7,  section  4,  under  certain  regu- 
lations in  the  Act.  But  by  section  27  the  state  says  individual 
citizens,  either  as  individuals  or  copartnerships,  except  in  towns 
of  less  tlian  500  population,  are  in  the  future  prohibited  from 
conducting  the  business  of  banking  in  any  of  its  branches.  The 
artificial  persons  created  by  the  Act  may  carry  on  the  business, 
but  no  natural  person  shall  be  permitted  to  do  so.  The  banl<er, 
therefore,  who  has  devoted  years  to  the  acquisition  of  that 
knowledge  of  the  business  that  enables  him  to  conduct  it  suc- 
cessfully, who  has  invested  his  capital  in  the  business  of  bank- 
ing, must  close  his  bank,  and  find  other  employment  for  his 
capital,  other  occupation  in  which  to  employ  his  talents  and 
abilities,  and  other  methods  for  providing  for  the  support  of 
himself  and  family.  If  the  police  power  of  the  state  is  as  broad 
and  comprehensive  as  claimed  by  the  learned  attorney-general, 
the  citizen  holds  his  right  to  liberty,  to  his  property,  and  to  the 
pursuit  of  happiness  at  the  will  of  the  legislative  power  alone. 

210 — Individual  Rights  Guaranteed. 

But  the  rights  of  the  citizen  are  not  thus  left  to  the  will 
of  the  law-making  power.  The  state  constitution  and  the 
national  constitution  have  placed  around  the  rights  of  the 
citizen  safeguards  that  protect  them  from  invasion  by  legis- 
lative action.  The  constitutional  provisions  more  directly 
bearing  upon  the  questions  being  discussed  are  as  follows : 
"No  law  shall  be  passed  granting  to  any  citizen,  class  of  citi- 
zens, or  corporations,  privileges  or  immunities  which,  upon 


Business  and  Legislation.  403 

[STATE    V.    SCOLGAL.] 

the  same  terms,  shall  not  equally  belong  to  all  citizens  or 
corporations."  Section  i  of  the  same  article  is  as  follows : 
"All  men  are  born  equally  free  and  independent,  and  have 
certain  inherent  rights,  among  which  are  those  of  enjoying 
and  defending  life  and  liberty,  of  acquiring  and  protecting 
property,  and  the  pursuit  of  happiness."  Section  2  of  the 
same  article  provides:  "No  person  shall  be  deprived  of  life, 
liberty,  or  property  without  due  process  of  law."  And  Sec- 
tion I,  article  14  of  the  Constitution  of  the  United  States 
provides :  "No  state  shall  make  or  enforce  any  law  which 
shall  abridge  the  privileges  or  immunities  of  citizens  of  the 
United  States;  nor  shall  any  state  deprive  any  person  of  life, 
liberty,  or  property  without  due  process  of  law,  nor  deny  to 
any  person  within  its  jurisdiction  the  equal  protection  of  the 
law."  These  constitutional  provisions  are  not  mere  "glitter- 
ing generalities"  but  constitute  sacred  guaranties  to  the  citi- 
zen that  his  liberty  and  his  right  to  the  pursuit  of  happiness 
shall  not  be  abridged,  and  his  right  to  his  property  shall  not 
be  invaded  by  the  legislative  power,  except  so  far  as  author- 
ized by  the  sovereign  power  as  expressed  in  constitutional  pro- 
visions, or  by  due  process  of  law. 

What  are  "privileges  and  immunities"  which  the  legisla- 
ture is  prohibited  from  granting  to  any  citizen,  class  of  citi- 
zens, or  corporations?  The  most  satisfactory  definition  of 
this  clause  that  we  have  noticed  is  that  of  Mr.  Justice  Wash- 
ington in  Corfield  v.  Coryell."^^  In  discussing  the  clause  "priv- 
ileges and  immunities,"  he  said  he  had  "no  hesitation  in 
confining  these  expressions  to  those  privileges  and  immunities 
which  were  in  their  nature  fundamental,  which  belong  of 
right  to  citizens  of  all  free  governments,  and  which  have  at 

76  4  Wash.   C.   C.  380. 


404  Trusts  i^or  Business  Purpose;s. 

[STATE    V.    SCOTJGAL.l 

all  times  been  enjoyed  by  the  citizens  of  the  several  states 
which  compose  the  Union  from  the  time  of  their  becoming 
free,  independent,  and  sovereign;"  and  considering  these 
privileges  he  said  they  might  be  "all  comprehended  under 
the  following  general  heads :  protection  by  the  government ; 
the  enjoyment  of  life  and  liberty  with  the  right  to  acquire 
and  possess  property  of  every  kind ;  and  to  pursue  and  obtain 
happiness  and  safety;  subject,  nevertheless,  to  such  restraints 
as  the  government  may  justly  prescribe  for  the  general  good 
of  the  whole."  In  commenting  on  this  opinion,  Mr.  Justice 
Field,  in  his  opinion  in  the  slaughter-house  cases,  said :  "This 
appears  to  me  to  be  sound  construction  of  the  clause  in  ques- 
tion. The  privileges  and  immunities  designated  are  those 
which  of  right  belong  to  the  citizens  of  all  free  governments. 
Clearly,  among  these  must  be  placed  the  right  to  pursue  a 
lawful  employment  in  a  lawful  manner  without  other  restraints 
than  such  as  equally  effect  all  persons."''^' 

By  section  27  of  the  Act  we  are  considering,  the  privileges 
and  immunities  of  transacting  a  banking  business,  as  defined 
in  the  Act,  are  conferred  upon  corporations  alone  organized 
under  the  Act,  except  in  towns  containing  less  than  500  in- 
habitants. In  all  other  places  the  individual  citizens  are  pro- 
hibited from  transacting  such  banking  business  as  they  can- 
not— as  individuals — comply  with  the  terms  of  the  Act.  It  is 
contended  that  citizens  may  associate  themselves  together  and 
become  a  corporation  under  the  Act,  and  as  such  corporation, 
transact  the  business.  This  is  true,  but  can  the  citizen  be 
required  to  abandon  a  business,  not  necessarily  injurious  to 
the  community,  which  he  is  carrying  on  and  be  required  to 
invest  his  capital  in  a  corporation  over  which  he  may  have 

76  Slaughter-house  cases,  83  U.      S.  16  Wall.  97,  21  L.  Ed.  415. 


Business  and  Legislation.  405 

[STATE    V.    SCOUGAL.l 

no  control,  except  as  a  mere  stockholder,  or  otherwise  be 
deprived  of  his  right  to  pursue  his  lawful  calling?  Are  not 
these  privileges  and  immunities  granted  by  the  Act  to  corpora- 
tions, that  are  denied  to  individual  citizens? 

It  may  be  contended  that  there  is  no  discrimination  as  be- 
tween corporations ;  that  all  corporations  organized  under  the 
Act  are  granted  the  same  privileges  and  immunities ;  and  that 
this  satisfies  the  constitutional  provision.  But  this  is  too  nar- 
row a  construction  of  this  important  constitutional  provision 
intended  for  the  protection  of  the  rights  of  the  citizen.  In 
law,  a  corporation  is  a  citizen  of  the  state  of  its  creation,  and 
for  many  purposes  a  person  in  law  also.  When  these  privi- 
leges are  conferred  upon  private  corporations,  which  at  com- 
mon law  belong  to  the  citizen,  and  the  same  privilege  is  denied 
to  the  individual  citizen,  this  provision  of  the  Constitution, 
in  our  opinion,  is  violated. 

211 — Pursuit  of  Lawful  Business  is  a  Right. 

But  we  shall  proceed  to  consider  the  other  important  con- 
stitutional provisions  contained  in  the  first  and  second  sec- 
tions of  the  article.  The  right  of  "enjoying  and  defending 
life  and  liberty,  of  acquiring  and  protecting  property,  and 
the  pursuit  of  happiness,"  includes  the  right  to  pursue  any 
lawful  calling,  occupation,  or  business,  and  the  right  to  choose 
the  means  of  acquiring  property  and  the  pursuit  of  happiness, 
not  inconsistent  with  constitutional  provisions  or  the  rights  of 
others.  The  term,  "liberty"  as  used  in  the  Constitution,  does 
not  mean  mere  freedom  from  arrest  or  restraint,  but  it  means 
liberty  in  a  broader  and  more  comprehensive  sense.  It  means 
freedom  of  action;  freedom  in  the  selection  of  business,  call- 
ing or  avocation;  freedom  in  the  control  and  use  of  one's 


4o6  Trusts  for  Business  Purposes. 

[STATE    V.    SCOUGAL.] 

property  so  far  as  its  use  is  not  injurious  to  the  community 
and  does  not  infringe  the  rights  of  others;  freedom  in  exer- 
cising the  rights,  privileges  and  immunities  that  belong  to 
citizens  of  the  country  generally;  and  freedom  in  the  pursuit 
of  any  lawful  business  or  calling  selected  by  him. 

Of  but  little  value  to  the  citizen  could  be  these  provisions 
of  the  Constitution  if  the  state,  through  the  legislative  power, 
could  at  its  mere  will  and  pleasure  deprive  him  of  his  right 
to  pursue  any  lawful  business  or  caUing  not  offensive  or  in- 
jurious to  the  cominunity,  which  does  not  interfere  with  the 
equal  rights  of  others,  and  the  right  to  pursue  which  he  has 
derived  from  the  common  law.  So  too  it  may  be  said  of  that 
other  important  constitutional  provision:  "No  person  shall 
be  deprived  of  life,  liberty,  or  property  without  due  process 
of  law."  Speaking  of  this  provision,  Judge  Cooley  says : 
"What  the  legislature  ordains  and  the  Constitution  does  not 
prohibit  must  be  lawful.  But  if  the  Constitution  does  no  more 
than  to  provide  that  no  person  shall  be  deprived  of  life, 
liberty,  or  property  except  by  due  process  of  law,  it  makes 
an  important  provision  on  this  subject,  because  it  is  an  im- 
portant part  of  civil  liberty  to  have  the  right  to  follow  all  law- 
ful employments.''^''^ 

In  these  constitutional  provisions  are  found  the  guaranties 
to  the  citizen  of  his  right  to  liberty ;  his  right  to  the  pursuit 
of  happiness ;  his  right  to  pursue  in  his  own  way  any  lawful 
business  or  calling ;  and  his  right  to  property ;  as  well  as  from 
those  great  fundamental  principles  that  underHe  our  system 
of  government.  Mr.  Justice  Washington,  in  the  case  before 
cited,  in  speaking  of  the  rights  of  the  citizen  independent  of 
constitutional    provisions,    says :      "No    proposition    is    more 

77  Cooley,   Torts    277. 


Business  and  Legislation.  407 

[STATE    V.    SCOUGAL.] 

firmly  settled  than  that  it  is  one  of  the  fundamental  rights  and 
privileges  of  the  American  citizen  to  adopt  and  follow  such 
lawful  industrial  pursuits,  not  injurious  to  the  community, 
as  he  may  see  fit.'"''^  Mr.  Justice  Andrews  in  deHvering  the 
opinion  of  the  court  in  Bertholf  v.  O'Reilly''^  says :  "The  right 
to  liberty  includes  the  right  to  exercise  his  faculties  and  to 
follow  a  lawful  avocation  for  the  support  of  life." 

The  case  of  In  re  Jacobs^"  deserves  more  than  a  passing 
notice.  This  case  involved  the  right  of  a  citizen  to  pursue 
his  ordinary  calling,  of  which  the  legislature  by  a  law  sought 
to  deprive  him.  An  act  was  passed  by  the  legislature  of  the 
state  of  New  York  in  which  it  was  made  unlawful  for  any 
person  to  manufacture  cigars,  etc.,  on  any  floor  or  part  of  a 
floor  in  a  tenement-house  occupied  as  a  home.  Jacobs  was 
indicted  for  a  violation  of  the  Act  and  the  question  pre- 
sented was  "whether  or  not  the  Act  creating  the  offense  was 
a  constitutional  exercise  of  the  legislative  power."  Mr.  Jus- 
tice Earl  in  delivering  the  opinion  of  the  court,  discussed 
very  fully  the  powers  of  the  legislature  under  the  constitu- 
tion of  New  York,  and  the  police  power  of  the  state.  In 
speaking  of  "liberty"  as  used  in  the  constitution,  he  says: 
"So,  too,  one  may  be  deprived  of  his  liberty  and  his  constitu- 
tional rights  thereto  violated,  without  the  actual  imprison- 
ment or  restraint  of  his  person.  Liberty,  in  its  broad  sense, 
as  understood  in  this  country,  means  the  right,  not  only  of 
freedom  from  actual  servitude,  imprisonment,  or  restraint,  but 
the  right  of  one  to  use  his  faculties  in  all  lawful  ways;  to 
live  and  work  where  he  will;  to  earn  his  livelihood  in  any 

78  Cornfield  v.  Coryell,  4  Wash.  80  98    N.    Y.    98,    50   Am.    Rep. 

C.  C.  380.  636. 

7974   N.  Y.   509,  30   Am.   Rep. 
323. 


4o8  Trusts  for  Business  Purposes. 

[STATE    V.    SCOUGAL.l 

lawful  calling;  and  to  pursue  any  lawful  trade  or  avocation. 
All  laws,  therefore,  which  impair  or  trammel  these  rights, 
which  limit  one  in  his  choice  of  a  trade  or  profession,  or 
confine  him  to  work  or  live  in  a  specified  locality,  or  exclude 
him  from  his  own  house,  or  restrain  his  otherwise  lawful 
movements,  (except  as  such  laws  may  be  passed  in  the  exer- 
cise by  the  legislature  of  the  police  power  which  will  be  no- 
ticed later)  are  infringements  upon  his  fundamental  rights  of 
liberty  which  are  under  constitutional  protection."  The  court 
held  the  law  unconstitutional. 

People  V.  Marx^i  is  another  important  case  involving  the 
right  of  a  citizen  to  carry  on  the  business  of  manufacturing 
oleomargarine  which  the  legislature  of  the  state  had  declared 
unlawful.  The  power  of  the  legislature  over  the  business  of 
the  citizen  was  again  discussed  by  Rapallo,  J.  After  quot- 
ing the  sections  of  the  constitution  of  that  state  bearing  upon 
the  question,  he  says:  "These  constitutional  safeguards  have 
been  so  thoroughly  discussed  in  recent  cases  that  it  would  be 
superfluous  to  do  more  than  refer  to  the  conclusions  that  have 
been  reached  bearing  upon  the  questions  under  consideration. 
Among  these  no  proposition  is  more  firmly  settled  than  that 
it  is  one  of  the  fundamental  rights  and  privileges  of  every 
American  citizen  to  adopt  and  follow  such  lawful  industrial 
pursuit,  not  injurious  to  the  community,  as  he  may  see  fit." 
And  that  law  was  also  held  unconstitutional. 

In  Butchers'  U.  S.  H.  &  L.  S.  L.  Co.  v.  Crescent  City 
L.  S.  L.  &  S.  H.  Co.8»  Mr..  Justice  Field  says  that  among 
the  inalienable  rights  as  proclaimed  in  the  Declaration  of  In- 
dependence "is  the  right  of  men  to  pursue  any  lawful  busi- 
ness  or   vocation,   in   any   manner   not   inconsistent   with   the 

81  99  N.  Y.  377,  2  N.  E.  29.  82  111  U.  S.  746,  28  L.  Ed.  585. 


Business  and  LegisIvATion.  409 

[STATE    V.    SCOCGAL,.] 

equal  rights  of  others  which  may  increase  their  property  or 
develop  their  faculties  so  as  to  give  them  their  highest  en- 
joyment. The  common  business  and  calling  of  life,  the  ordi- 
nary trades  and  pursuits,  which  are  innocent  in  themselves 
and  have  been  followed  in  all  communities  from  time  imme- 
morial, must,  therefore,  be  free  in  this  country  to  all  alike, 
upon  the  same  terms.  The  right  to  pursue  them  without  let 
or  hindrance,  except  that  which  is  appHed  to  all  persons  of 
the  same  age,  sex,  and  condition,  is  a  distinguishing  privilege 
of  citizens  of  the  United  States  and  an  essential  element  of 
that  freedom  which  they  claim  as  their  birthright."  In  the 
same  case  Mr.  Justice  Bradley  says:  "I  hold  that  the  liberty 
of  pursuit,  the  right  to  follow  any  of  the  ordinary  callings  of 
life,  is  one  of  the  privileges  of  a  citizen  of  the  United  States," 
of  which  he  cannot  be  deprived  without  invading  his  rights 
to  liberty  within  the  meaning  of  the  Constitution. 

In  the  slaughter-house  cases,  supra,  Mr.  Justice  Bradley 
says :  "For  the  preservation,  exercise  and  enjoyment  of  these 
rights  the  individual  citizen,  as  a  necessity,  must  be  left  free 
to  adopt  such  calling,  profession,  or  trade  as  may  seem  to  him 
most  conducive  to  that  end.  Without  this  right,  he  cannot 
be  a  freeman.  This  right  to  choose  one's  calling  is  an  essen- 
tial part  of  that  liberty  which  it  is  the  object  of  government 
to  protect;  and  a  calling,  when  chosen,  is  a  man's  property 
and  right.  Liberty  and  property  are  not  protected  where 
these  rights  are  arbitrarily  assailed." 

It  will  thus  be  seen  that  the  citizen's  right  to  pursue  any 
lawful  business  is  more  than  a  mere  right;  it  is  property  that 
cannot  be  taken  from  him  "without  due  process  of  law."  But 
the  law  in  question  does  more  than  deprive  a  citizen  of  his 
occupation.  It  actually  takes  from  him  his  right  not  only  to 
continue  the  business  of  banking,  but  it  deprives  him  of  his 


4IO  Trusts  for  Business  Purposes. 

[STATE    V.    SCOrCAL.] 

property  employed  in  his  business.  The  vaults,  safes,  and 
bank  furniture  of  the  banker  may  become  comparatively 
valueless  for  other  purposes.  Yet,  whatever  that  loss  by  dim- 
inution in  value  may  be,  it  is  property  taken  from  him  with- 
out "due  process  of  law."  It  is  not  the  question  of  how  much 
or  how  little  the  loss  to  the  citizen  may  be.  It  is  a  question 
of  the  power  of  the  legislature  to  deprive  a  citizen  of  his 
property.  If  the  power  exists  to  take  any,  it  would  be  diffi- 
cult to  fix  the  limit.^^ 

It  is  further  contended  that  if  the  business  of  banking,  other 
than  the  issue  of  demand  notes  to  circulate  as  currency,  is 
not  a  franchise,  and  the  business  cannot  be  prohibited  under 
the  police  power,  still  such  banking  is  affected  with  a  public 
use,  so  that  it  may  be  regulated  by  law  like  public  warehouses, 
as  held  in  Munn  v.  Illinois.^*  The  decision  in  that  case  was 
based  upon  the  principle  that  all  shippers  of  grain  through 
the  city  of  Chicago  were  of  necessity  compelled  to  make  use 
of  the  warehouses  of  the  city  as  a  means  of  transshipment  of 
the  same.  These  warehouses  stood  "in  the  gateway  of  com- 
merce," and  their  owners  exacted  toll  of  all  who  were  thus 
of  necessity  compelled  to  use  them.  Certainly  such  a  business 
might  well  be  held  to  be  clothed  with  a  public  interest,  and 
like  the  business  of  the  innkeeper,  common  carrier,  miller,  etc., 
subject  to  the  control  of  the  state. 

But  the  state  of  Illinois  did  not  prohibit  any  citizen  from 
carrying  on  the  warehouse  business.  It  subjected  those  engaged 
in  the  business  to  such  regulations  as  the  state  deemed  nec- 
essary by  requiring  warehousemen  to  take  out  a  license,  give 
bond,  etc.     We  are  unable  to  discover  any  similarity  between 

83  Millett    V.    People,    117    111.  84  94  U.  S.  113,  24  L.  Ed.  77. 

294,  5  West.  Rep.  155. 


Business  and  Legislation.  411 

[STATE    V.    SCOUGAL.l 

the  business  of  the  private  banker  in  discounting  paper,  buy- 
ing and  selhng  exchange,  loaning  money,  or  receiving  de- 
posits; and  warehousemen,  common  carriers,  innkeepers,  etc. 
No  one  is  required  to  do  business  with  a  private  banker,  any 
more  than  with  the  merchant  or  the  manufacturer.  But,  as- 
suming that  the  business  of  banking  we  are  now  considering 
is  clothed  with  such  public  use  that  it  may  be  controlled  by 
the  state  (and  we  think  it  is  so  affected  with  a  public  in- 
terest), still  it  does  not  follow  that  the  citizen  may  be  deprived 
of  the  right  to  carry  on  the  business.  This,  like  any  other 
business,  may  be  subjected  to  reasonable  regulations  which 
shall  alike  apply  to   all  citizens   and  corporations. 

The  attorney  general  relies  mainly  for  a  reversal  of  the 
judgment  of  the  court  below  upon  the  authority  of  Morse  on 
Banks  and  Banking,  3d  ed.  Section  13,  and  the  cases  referred 
to  by  him  and  the  decision  of  the  Supreme  Court  of  North 
Dakota.85  The  cases  cited  by  Mr.  Morse  as  supporting  the 
propositions  laid  down  by  him  are  mainly  cases  decided  in  the 
State  of  New  York,  and  all  except  Curtis  v.  Leavitt,*^  were 
decided  over  half  a  century  ago.  Assuming  that  they  do 
support  the  propositions  laid  down  by  Mr.  Morse  (of  which, 
after  a  careful  examination,  we  are  left  somewhat  in  doubt), 
still  we  do  not  think  that  these  authorities  should  control  this 
court  in  the  decision  of  this  case.  Neither  the  constitutional 
provisions  in  force  in  that  state,  nor  the  laws  under  which 
the  decisions  were  made,  are  accessible  to  us  and  hence  we 
are  unable  to  determine  what  they  were.  In  neither  of  the 
cases  cited  was  the  constitutionality  of  the  laws  then  being 
considered  raised  or  passed  upon  by  the  court.     It  would  also 

85  state  V.  Woodmanse,  1  N.  D.  86  15  N.  Y.   9. 

246,   11   L.   R.   A.   420,   46   N.   W. 
971. 


412  Trusts  for  Business  Purposes. 

[state  v.  scougal.] 

seem  from  the  decisions  that  private  banking  was  neither 
prohibited  nor  restrained  at  that  time.^'' 

In  1837  all  laws  restraining  banking,  except  as  to  the  issu- 
ing of  demand  notes  intended  to  circulate  as  money,  were 
repealed.^''^^  Since  those  early  decisions  in  New  York,  the 
rights  of  individual  citizens  to  engage  in  and  carry  on  any 
lawful  pursuit  or  calling,  and  the  limitations  imposed  upon 
the  legislative  power  by  the  provisions  contained  in  the  more 
modern  constitutions,  have  been  very  fully  discussed  and  con- 
sidered in  numerous  cases,  both  in  the  state  and  federal  courts, 
and  the  principles  governing  the  rights  of  individuals  and  the 
legislative  power  over  such  rights,  have  become  quite  well 
settled.  The  earlier  New  York  cases — if  they  assert  the  doc- 
trine claimed  for  them — could  hardly  be  reconciled  with  the 
later  cases  of  In  Re  Jacobs  and  People  v.  Marx,  supra,  as  to 
the  right  of  the  citizen  to  pursue  any  lawful  business,  sub- 
ject only  to  proper  regulations  by  the  legislature.  The  case 
of  Nance  v.  Hemphill^^  and  the  case  cited  from  Texas®^  have 
not  been  examined  by  us.  We  conclude,  however,  that  as 
digested,  they  are  not  very  important  to  the  decision  of  this 
case.  The  only  modern  case  that  seems  to  support  the  posi- 
tion of  the  attorney  general  is  that  of  State  v.  Woodmanse, 
supra.  But,  notwithstanding  our  very  high  appreciation  of 
the  decisions  of  that  court,  we  are  unable  to  reach  the  same 
conclusions  that  that  court  has  arrived  at  upon  the  consti- 
tutionality of  a  law  which  is  said  to  be  quite  similar  to  the 
one  now  before  us. 

Our  conclusions  are  that  the  legislature  exceeded  its  pow- 
ers in  attempting  to  prohibit  all  individual  citizens   of  this 

87  Briston  v.  Barker,  14  Johns  88  l  Ala.  551. 

205.  89  State    v.    Williams,    8    Tex. 

873  Curtis  V.  Leavitt,  15  N.  Y.  9.      255. 


Business  and  Legislation.  413 

[STATE    V.    SCOUGAL.l 

state  from  continuing  to  carry  on  the  business  of  banking 
as  conferred  upon  corporations  by  subdivision  7,  section  4 
of  the  Act  under  consideration;  and  that  section  27  of  said 
Act  which  provides  that  "it  shall  be  unlawful  for  any  indi- 
vidual, firms,  or  corporations  to  continue  to  transact  a  bank- 
ing business,  or  to  receive  deposits,"  etc.,  "without  first  hav- 
ing complied  with  the  provisions  of  this  act,"  so  far  as  said 
Act  affects  individual  citizens,  is  in  conflict  with  the  pro- 
visions of  the  constitution  of  this  State,  and  therefore  void. 
This  decision  is  not  intended  to  affect  in  any  manner  the  re- 
maining provisions  of  said  Act,  or  of  said  section  27,  except 
so  far  as  it  prohibits  any  individual  or  firm  from  transacting 
such  banking  business  as  is  authorized  by  the  Act ;  that  being 
the  only  question  raised  in  this  case  or  considered  by  the  court. 
The  judgment  of  the  court  below  is  affirmed;  and  all  the 
judges  concur." 

The  trust  is  a  creature  of  contract;  endowed  with  the  same 
protection  under  our  constitution  and  the  laws  as  a  citizen; 
with  rights  the  same  as  an  individual;  beholding  in  no  re- 
spect to  a  privilege  or  franchise  from  the  state.  From  the 
many  decisions  on  "rights"  cited  in  the  foregoing  chapter, 
we  may  conclude  that  the  right  of  the  trust  or  the  individual 
to  engage  in  all  lawful  business  wherein  a  franchise  is  not 
involved,  will  continue  as  long  as  our  present  form  of  gov- 
ernment exists. 


CHAPTER  XXI. 
ESSENTIALS   IN  PREPARING   TRUST   INSTRUMENT. 

In  drawing  a  trust  instrument  certain  fundamentals  should 
be  kept  in  mind,  such  as  trust  property,  elements  of,^  duration 
of,  the  rule  against  perpetuities,  seal,  purpose  of,  beneficial  in- 
terests, committee  of  beneficiaries,  liability — personal  and  part- 
nership. There  are  cases  \vhere  alleged  trusts  have  been  ad- 
judged partnerships  or  associations,  the  cause  for  such  con- 
struction may  be  found  in  the  instrument  itself.  A  purported 
declaration  of  trust  may,  in  fact,  create  a  partnership  because 
elementary  principles  of  law  have  not  been  observed  in  drafting 
the  instrument.  The  essentials  of  a  trust  must  be  embodied  in 
the  declaration,  and  where  this  is  done  the  courts  will  construe 
it  a  pure  trust.^  Following  is  an  outline  of  some  of  the  general 
principles  necessary  to  the  creation  of  a  pure  trust : 

212 — Trust  Property. 

One  of  the  first  essentials  of  a  trust  is  property  or  property 
rights.®  The  fact  that  an  association  may  be  created  without 
any  property  distinguishes  it  from  a  trust.  The  writer  has 
examined  a  number  of  these  so-called  trusts  which  were  not 
based  on  property  or  property  rights.  Should  a  trust  of  this 
character  come  up  for  judicial  construction,  it  would  be  im- 
possible for  the  courts  to  adjudicate  it  a  trust,  for  irrespective 
of  what  the  parties  intended,  it  would  lack  a  fundamental  prin- 

1  See  Elements  par.  6.  25-27. 

2  See  Trust  as  an  Entity  par.         3  See  Trust  Property  par.  43. 

(414) 


Esse:ntials  in  Pre;paring  Trust  Instrument.      415 

ciple  of  the  trust.  Property  may  be  described  in  the  body  of 
the  instrument,  or  it  may  be  set  out  in  a  schedule  which  is  made 
a  part  of  the  trust. 

213 — Duration  of  Trust. 

The  Hfe  of  the  trust  should  be  specifically  provided  for,  and 
this  portion  of  the  instrument  should  not  offend  the  rule 
against  perpetuities,*  which  is  a  life  or  lives  in  being  and 
twenty-one  years  thereafter.  A  trust  may  be  drawn  for  a 
period  not  to  exceed  twenty-one  years.  If  a  longer  period  is 
desired,  a  provision  may  be  inserted  to  the  effect  that  the  trust 
is  to  continue  during  the  lives  of  the  trustees  named  at  the 
creation  of  the  deed,  and  for  twenty-one  years  after  the  death 
of  the  last  original  trustee.  At  this  juncture,  provision  should 
be  made  for  the  proper  disposition  of  the  property  at  the  time 
of  termination  of  the  trust,  or  when  the  mission  of  the  trust  has 
been  fulfilled.^ 

214 — Seal. 

Trustees  may  use  a  seal  to  give  more  formality  to  their  acts 
if  they  so  desire,  but  to  do  this  they  must  be  so  empowered  in 
the  trust  instrument. 

215 — Purpose  of  Trust. 

The  business,  trade,  commerce  or  endeavor  to  be  carried  on 
under  the  trust  agreement  should  be  stated  in  unambiguous 
terms.  It  is  good  practice  to  insert  a  further  provision  giving 
power  to  the  trustees  to  do  any  and  all  things  necessary  to  carry 
out  the  spirit  of  the  trust,  for  without  this  they  would  have  no 

4  See    Rule    Against    Perpetu-  6  See  Termination  of  Trust  In- 

ities  Par.  16.  strument  Par.  15. 


4i6  Trusts  for  Business  Purposes. 

authority  to  do  anything  beyond  what  is  specifically  set  forth 
and  what  is  necessarily  implied.^ 

216 — Beneficial  Interests. 

The  trust  property  is  held  whole  by  the  trustees  for  the  bene- 
ficiaries; it  is  not  subject  to  division,  but  the  mass,  i.  e.,  all  of 
the  trust  property  may  be  represented  by  so  many  beneficial 
interests  which  may  have  a  fixed  par  value,  or  the  property  may 
be  evidenced  by  a  certain  number  of  beneficial  interests  of  no 
par  value.  If  certificates''  are  to  be  issued  to  the  owners  of 
beneficial  interests,  a  copy  of  a  certificate  should  be  made  a 
part  of  the  deed  of  trust.  These  interests  are  personal  property 
and  the  trust  instrument  should  so  state.^  Certificates  may  be 
sold  and  assigned  the  same  as  any  other  personal  property ;  and 
provision  should  be  made  for  such  sale  and  transfer,  and  for 
proper  recording  with  the  trustees. 

217 — Committee  of  Beneficiaries. 

It  should  be  made  clear  in  the  trust  deed  that  the  trustees 
have  full  title  to  all  property ;  tliat  they  are  free  in  all  their  acts 
and  undertakings;  and  that  they  are  in  no  way  subject  to  dicta- 
tion from  the  beneficiaries.  It  is  prudent  to  provide  for  meet- 
ings of  the  beneficiaries  at  certain  stated  periods.  Provision 
may  also  be  made  for  the  beneficiaries  at  their  meetings  to  elect 
a  committee  whose  duties  should  be  to  act  in  an  advisory  capac- 
ity to  the  trustees ;  in  this  way  the  beneficiaries  could  act  as  a 
unit  and  a  closer  relationship  would  be  maintained  between  them 

6  See  For  What  Purpose  a  8  See  Shareholders  Interest 
Trust  May  be  Created  Par.  4.            Personal  Property  Par.  55-56. 

7  See  Certificates  Par.  57  to  65. 


Essentials  in  Preparing  Trust  Instrument.      417 

and  the  trustees.  The  committee  could  audit  the  trustees'  books 
and  could  see  that  the  trust  was  properly  carried  out,  that  there 
was  no  waste  or  loss,  and  no  needless  expense.  The  committee 
could  report  their  findings  from  time  to  time  to  the  beneficiaries 
and  give  their  recommendations.  In  this  connection  it  may  be 
observed  that  this  committee  must  not  be  given  any  power  in 
the  declaration  of  trust  over  the  trustee,  other  than  that  of  ad- 
visory. 

218 — Partnership  Liability. 

The  chief  factor  in  determining  whether  a  pure  trust  has 
been  created  or  not  is  the  extent  of  the  power  given  the  benefi- 
ciaries. The  general  rule  is  that  where  the  trustees  are  in  any 
manner  limited  in  their  actions  by  the  will  of  the  beneficiaries, 
then  a  partnership  is  created  and  not  a  trust.^  But  where  the 
trustees  have  title  to  all  trust  property  and  are  not  subject  to 
dictation  from  the  beneficiaries  then  a  pure  trust  is  created  and 
there  is  no  partnership  liability.  It  should  be  made  clear  in  the 
declaration  of  trust  that  the  trustees  are  uncontrolled  by  the 
beneficiaries. 

2ig — Liability  Limited. 

The  trust  property  should  be  made  to  respond  to  all  debt  and 
damages.^**  The  trustees  being  fiduciaries  should  be  held  free 
from  liability  by  special  provision  in  the  declaration  of  trust. ^^ 
In  addition  to  their  liability  being  limited  to  the  property  and 

9  See      Trusts      Distinguished  116. 
from  other  Organizations :     Not  10  See  Liability  of  Trust  Prop- 

a   Partnership   Par.    140   to    149.  erty  Par.  48. 
Also    Partnership    liability    not  11  See  Limitation  of  Trustees' 

Applicable  to   Beneficiaries  Par.  Liability  Par.  123. 


4i8  Trusts  for  Business  Purposes. 

assets  of  the  trust,  all  contracts  should  carry  a  provision  show- 
ing that  the  trustees'  liability  is  restricted,  and  that  they  con- 
tract as  trustees,  and  not  as  individuals.  This  should  be  done 
for  the  reason  that  all  parties  should  have  notice  with  whom 
they  deal. 


APPENDIX. 

The  copies  of  trust  agreements  herein  set  out  are  presented 
with  the  view  of  giving  ideas  and  suggestions  to  those  who  con- 
template writing  trust  deeds. 

These  have  been  selected  because  of  the  variety  of  business 
conducted  under  a  declaration  of  trust.  Most  of  them  have 
been  before  the  courts ;  the  citations  are  given  so  that  the  de- 
cisions may  be  further  consulted  if  so  desired. 


(419) 


EXHIBITS. 
THE  WACHUSETT  REALTY  TRUST. 

DECIvARATION. 

The  Wachusett  Realty  Trust  was  upheld  by  the  United 
States  Supreme  Court  as  a  trust.  In  this  case  the  court 
held  that  the  trust  was  not  an  association,  but  was  in 
fact  a  pure  trust.  It  is  reported  as  Crocker  v.  Malley,  249 
U.  S.  223;  39  Sup.  Ct.  Rep.  270;  63  L.  Ed.  573;  2  A.  L.  R. 
1601. 

KNOW  ALL  MEN  BY  THESE  PRESENTS,  That  we, 
Alvah  Crocker  and  Charles  T.  Crocker  both  of  Fitchburg,  in 
the  Commonwealth  of  Massachusetts,  John  J.  Riker  of  the 
City  and  State  of  New  York,  Samuel  E.  M.  Crocker  of  said 
Fitchburg,  and  FeHx  Rackemann  of  Milton  in  said  Common- 
wealth, the  grantees  named  in  a  certain  deed  from  the  Crocker, 
Burbank  &  Co.,  Inc.,  (Maine  Corporation),  dated  this  day  by 
which  deed  there  are  conveyed  to  us  certain  lands  and  buildings 
situate  in  the  City  of  Fitchburg  in  the  Commonwealth  of  Mas- 
sachusetts, hereby  declare  and  agree  that  we  will,  and  our  heirs 
and  successors  shall,  hold  said  granted  premises,  and  all  other 
funds  and  property  at  any  time  transferred  to  and  received  by 
the  Trustees  hereunder,  for  the  purposes,  with  the  powers,  and 
subject  to  the  provisions  hereof,  for  the  benefit  of  the  cestui 
que  trusts  (who  shall  be  trust  beneficiaries  only,  without  part- 
nership, associate  or  any  other  relation  whatever  inter  sese), 
and  upon  the  trusts  following,  viz : 

(420) 


^ 


I 


Appendix.  421 

1.  In  trust  to  convert  the  same  into  money  and  distribute 
the  net  proceeds  thereof  among  the  persons  at  the  time  of  such 
conversion  holding  and  owning  beneficial  interests  therein,  as 
evidenced  by  the  receipt  certificates  issued  by  the  Trustees  as 
hereinafter  provided;  it  being  however  expressly  understood 
and  agreed  that  the  Trustees  may,  in  their  uncontrolled  discre- 
tion, defer  or  postpone  such  conversion  and  distribution,  except 
that  the  same  shall  not  be  postponed  beyond  the  end  of  twenty 
years  from  and  after  the  death  of  the  last  survivor  of  the  per- 
sons named  and  described  in  the  last  paragraph  hereof.  Dur- 
ing such  postponement,  and  until  such  conversion,  the  interests 
of  the  cestui  que  trusts  shall  be  considered  for  purposes  of 
transmission  and  otherwise  as  personal  property. 

2.  In  trust,  pending  final  conversion  and  distribution  of  the 
property,  to  manage  and  control  the  same,  the  Trustees  having, 
for  such  purposes  and  for  all  purposes  of  sale,  lease,  mortgage, 
exchange,  improvement  and  development,  and  any  and  all  ar- 
rangements, contracts  and  dispositions  of  the  trust  property,  or 
any  part  thereof,  all  and  as  full  discretionary  powers  and  au- 
thority as  they  would  have  if  they  were  themselves  the  sole  and 
absolute  beneficial  owners  thereof  in  fee  simple 

3.  In  trust  to  collect  and  receive  all  rents  and  income  from 
the  property,  and  semi-annually  or  oftener  at  their  convenience, 
to  distribute  such  portion  thereof  as  they  may,  in  their  discre- 
tion, determine  to  be  fairly  distributable  net  income,  to  and 
among  the  several  cestui  que  trusts  according  to  their  respective 
fractional  interests,  the  Trustees  in  this  connection  having  full 
authority  from  time  to  time  to  use  any  funds  on  hand,  whether 
received  as  capital  or  income,  for  purposes  of  any  repair,  im- 
provement, protection  or  development  of  the  property  held 
hereunder,  or  the  acquisition  of  other  property  as  the  Trustees 
may  determine  to  be  wise  and  expedient,  for  the  protection  and 


422  Trusts  for  Business  Purposes. 

development  of  the  trust  property  as  a  whole  pending  its  con- 
version and  distribution.  The  determinations  of  the  Trustees, 
made  in  good  faith,  as  to  all  questions  as  between  "capital"  and 
"income"  shall  be  final. 

4.  The  said  Crocker,  Burbank  &  Co.  Inc.  (Maine  Company) 
having  determined  to  wind  up  its  affairs  and  be  dissolved,  with- 
out waiting  for  final  cash  sale  of  its  real  estate,  this  trust  is 
declared  in  favor,  and  for  the  benefit  of  the  eight  shareholders 
of  said  Maine  corporation,  according  to  their  respective  frac- 
tional interests,  to  whom  the  Trustees  shall  issue  proper  receipt 
certificates,  which  certificates,  and  all  others  which  may  be  here- 
after issued  in  exchange  or  substitution  therefor,  shall  be 
deemed  parts  hereof  and  conclusively  evidence  the  ownership 
of  respective  interests  in  this  trust ;  and  the  Trustees  shall,  from 
time  to  time,  on  request,  (on  surrender  of  the  old)  issue  such 
new  certificates  as  may  be  proper  and  necessary  to  evidence  any 
new  or  sub-divided  interests, 

5.  The  Trustees  shall  have  authority  to  borrov/  money  and 
fix  the  terms  of  any  loans,  and  give  any  pledge,  mortgage  or 
other  security  which  they  may  deem  wise.  No  purchaser  from 
or  lender  to  the  Trustees  shall  ever  have  any  liability  to  see  to 
the  application  of  any  proceeds. 

6.  The  Trustees  may  employ  all  such  agents  and  attorneys 
as  they  may  think  proper  and  find  expedient,  and  prescribe  their 
powers  and  duties,  and  shall  not  be  personally  responsible  for 
any  misconduct,  errors  or  omissions  of  such  agents  or  attorneys 
employed  and  retained  with  reasonable  care. 

7.  The  Trustees  shall  at  all  times  keep  full  and  proper  books 
of  accoimt  and  records  of  their  proceedings  and  doings,  and 
shall,  at  least  annually,  render  account  of  the  trust  to  any  bene- 
ficiary requesting  the  same,  but  no  Trustee  serving  hereunder 
shall  be  obliged  to  give  any  bond,  nor  shall  any  Trustee  have 


Appendix.  423 

any  liability  except  for  the  results  of  his  own  gross  negligence 
or  bad  faith. 

8.  The  recording  of  this  instrument  shall  be  at  such  times 
and  in  such  places  as  the  Trustees  may  in  their  discretion,  de- 
termine to  be  necessary  or  expedient,  and  they  shall  in  like 
manner  determine  the  form  and  record  of  all  muniments  of 
title. 

9.  The  Trustees  shall  have  full  power  at  any  time,  pending 
final  termination  of  this  trust,  to  transfer  the  whole  or  any  part 
of  the  property  then  held  by  them  hereunder  to  any  corpora- 
tion which  they  may  acquire  or  cause  to  be  organized  for  the 
more  convenient  or  expedient  holding  or  management  of  the 
property,  taking  any  securities  issued  by  such  corporation  in 
exchange  and  payment  therefor,  and  the  Trustees,  or  any  of 
them,  may  at  any  time  be  or  become  directors  or  officers  of  any 
corporation  any  shares  of  which  are  held  by  them. 

10.  The  Trustees  shall  be  entitled  to  receive  reasonable 
compensation  for  service  not  exceeding  a  total  of  one  per  cent 
reckoned  upon  the  gross  income  received  by  them  as  such,  un- 
less, at  any  time,  a  majority  in  interest  of  the  cestui  que  trusts 
consent  in  writing  to  some  larger  compensation  for  any  past 
service.  The  Trustees  shall  also  be  entitled  to  reimbursement 
and  indemnification  from  the  trust  property  for  all  their  proper 
expenses  and  liabilities,  and  shall  be  entitled  at  all  times  to  the 
advice  of  counsel;  and  traveling  expenses  to  and  from  any 
meetings  of  the  Trustees  shall  be  considered  proper  expenses. 

11.  Any  Trustee  hereunder  may  resign  by  written  instru- 
ment duly  acknowledged  and  attached  to  the  original  of  this 
instrument,  or  recorded  with  Worcester  County  (North  Dis- 
trict) Deeds  if  the  original  hereof  be  then  there  recorded. 

Any  vacancy  in  the  office  of  the  Trustee,  however  occasioned, 
shall  be  filled  by  the  remaining  Trustees  by  an  instrument  in 


424  Trusts  for  Business  Purposes. 

writing,  signed  by  them  and  assented  to  in  writing,  by  the 
holder  or  holders  of  a  majority  in  amount  of  the  beneficial  in- 
terests herein,  such  appointment  to  be  in  like  manner  attached 
to  the  original  of  this  instrument,  or  recorded  as  in  the  case 
of  resignation  last  above  provided  for. 

12.  If,  at  any  time  or  times,  a  majority  of  the  Trustees 
hereunder  shall  certify  in  writing  that  the  remaining  Trustees 
are  either  absent  from  the  Commonwealth  of  Massachusetts  or 
incapacitated  through  illness  or  otherwise,  from  acting,  then 
such  majority  shall,  at  such  time  or  times,  have,  and  may  exer- 
cise, any  and  all  the  powers  of  the  Trustees  hereunder  with 
like  effect  as  if  similarly  exercised  by  all. 

13.  The  terms  and  provisions  of  this  trust  may  be  modified 
at  any  time  or  times  by  instrument  in  writing,  signed,  sealed 
and  acknowledged  by  the  then  Trustees,  assented  to  in  writing 
by  a  majority  in  interest  of  the  cestui  que  trusts,  and  attached 
to  the  original  of  this  instrument,  or  recorded  with  Worcester 
County  (North  District)  Deeds  if  the  original  hereof  be  then 
there  recorded. 

14.  The  certificate  in  writing  of  the  Trustees  as  to  any 
resignation  from  the  office  of  Trustee  hereunder  and  as  to  the 
appointment  of  any  new  trustees  hereunder  and  as  to  the  ex- 
istence or  non-existence  of  any  modifications  hereof,  may  al- 
ways be  relied  upon,  and  shall  always  be  conclusive  evidence  in 
favor  of  all  persons  dealing  in  good  faith  with  said  Trustees 
in  reliance  upon  such  certificate. 

15.  The  title  of  this  trust,  (fixed  for  convenience)  shall  be 
"The  Wachusett  Realty  Trust,"  and  the  term  "Trustees"  in 
this  instrument  shall  be  deemed  to  include  the  original  and  all 
successor  trustees. 

16.  At  the  end  of  twenty  years  from  and  after  the  death 
of  the  last  survivor  of  said  Charles  T.  Crocker,  Samuel  E.  M. 


Appendix,  425 

Crocker  and  Alvah  Crocker,  and  of  the  lawful  issue  now  living 
of  any  of  them  (unless  this  trust  shall  theretofore  have  been 
otherwise  lawfully  terminated),  all  the  property  of  every  kind 
then  held  hereunder  shall  be  sold  by  the  Trustees  and  equitable 
distribution  made  of  the  net  proceeds  among  the  persons  then 
entitled. 

IN    WITNESS    WHEREOF    we   have   hereunto    set   our 
hands  and  common  seal  on  this  29th  day  of  March  in  the  year 
nineteen  hundred  and  twelve. 
Executed  in  duplicate 

Alvah  Crocker 
Charles  T.  Crocker     (Seal) 
John.  J.  Riker 
Sam.  E.  M.  Crocker 
Felix  Rackemann 
Commonwealth  of  Massachusetts. 
Worcester,  ss.     March  29.,  19 12.    Then  personally  appeared 
the  above  named  Alvah  Crocker  and  acknowledged  the  fore- 
going instrument  to  be  his  free  act  and  deed,  Before  me, 

Chas.  A.  Morgan,  Justice  of  the  Peace. 
Received  March  29,  19 12  at  3  h.  10  m.  P.  M.     Entered  81 
Examined. 


426  Trusts  for  Business  Purposes. 

DAVIS  COGGINS  OIL  CO. 

This  trust,  was  in  litigation  in  the  Texas  courts,  225  S.  W. 
73  and  there  the  trust  agreement  was  upheld  as  such.  The 
court  in  substance  says  that  a  trust  was  created  by  the 
instrument  and  not  a  partnership,  the  trust  reads  as  fol- 
lows: 

Articles  of  Agreement. 

State  of  Texas 
County  of  Wichita 

This  Agreement  made  this  the  4th  day  of  January  1918,  by 
and  between  J  C  Davis,  B  F  Coggins,  J  Fred  Smith,  A  C 
Parker  and  W  F  Reynolds  together  with  their  assigns,  herein- 
after designated  as  "Subscribers"  and  J  C  Davis,  B  F  Cog- 
gins  and  J  Fred  Smith,  together  v,dth  their  successors,  herein- 
after designated  as  "Trustees"  Witnesseth: 

That,  whereas,  the  subscribers  have  transferred,  conveyed 
and  delivered  and  by  these  presents  do  transfer  convey  and 
deliver  to  the  trustees  under  the  designation  of  the  Davis  Cog- 
gins  Oil  Co.  all  the  rights,  interest  and  privileges  acquired 
by  said  subscribers  or  any  of  them,  or  their  assigns,  to 
prospect  for,  develop  and  sell  oil  and  minerals  on  any  part 
or  on  all  of  the  following  tracts  of  land,  to  wit;  80  acres 
out  of  M  Powell  Survey :  Eighty  acres  of  land  out  of  the 
M  Powell  Survey  said  tract  being  that  lease  originally  made 
by  C  Birk  to  W  Newton  Maer  on  the  25th  day  of  May  1917, 
of  record  in  Book  84,  page  522  of  the  deed  Records  of 
Wichita  County,  Texas,  and  more  fully  described  as  fol- 
lows; 

Starting  at  a  point  672  vrs.  South  of  the  Southeast  corner 
of  the  Wm  Kepler  Survey;  Thence  S  336  vrs.  Thence  W 
1344  vrs;  thence  N  336  vrs;  Thence  E  1344  vrs.  to  the  place 


Appendix.  427 

of  beginning,   said   lease  being   situated   in  Wichita   County, 
Texas. 

200  acres  out  of  the  Amazon  Huston  Survey  Lying  and 
being  situated  in  Wichita  County,  Texas,  and  being  200  acres 
of  land  out  of  a  372  acre  tract  in  said  County  and  bounded 
as  follows;  Out  of  the  Amazon  Huston  Survey  more  com- 
monly called  the  James  A  Ventress  Abstract  No  103,  Cert 
No  882,  with  field  notes  as  follows;  beginning  at  the  South- 
west corner  of  said  Amazon  Huston  Survey  which  is  also 
the  Southeast  corner  of  the  William  Graves  Survey:  Thence 
down  the  Wichita  River  as  follows;  N  66 >^  E  188  vrs;  N  74 
E  278  vrs.  South  87  E  258  vrs,  a  stake  on  the  river  bank; 
the  same  being  the  S  E  Corner  of  said  Amazon  Huston 
Survey;  thence  North  2091  vrs  a  stone;  thence  West  966  vrs 
a  stone  thence  South  2358  vrs.  to  the  place  of  beginning,  this 
description  and  field  notes  is  for  the  entire  372  acres  and  is 
known  as  Block  No  23  of  Cowherd  Subdivision  in  Wichita 
County,  Texas  the  200  acres  herein  transferred  is  and  under- 
stood to  be  the  200  acres  off  of  the  North  end  of  the  above 
described  372  acre  tract,  and  to  contain  200  acres  of  land 
and  no  more. 

120  acres  out  of  the  S  A  &  M  G  Ry;  120  acres  of  land  out 
of  the  North  East  one  fourth  (%)  of  Section  No  Two  (2) 
S  A  &  M  G  Ry  Survey,  same  being  all  of  said  ^  section, 
except  40  acres  heretofore  leased  to  Porter  Farrell  and  being 
the  same  land  conveyed  to  W  T  W^aggoner  by  W  F  George. 

And  reference  is  made  to  the  lease  or  contracts  covering 
above  described  tracts  of  land,  for  the  terms  of  same;  and 
whereas  the  trustees  for  the  purpose  of  defining  the  interest 
of  the  subscribers  and  their  assigns  in  said  property,  have 
issued  to  the  subscribers,  in  proportion  to  their  several  inter- 
ests negotiable  certificates  or  evidences  of  interest  as  cestuis 


428  Trusts  for  Business  PuRPOs:es. 

que  trustent  to  the  number  of  two  thousand  (2,000)   shares, 
of  the  part  value  of  one  hundred  ($100.00)  dollars,  each. 

Now,  Therefore  the  trustees  hereby  declare  that  they  ac- 
cept and  hold  the  property  above  described  so  transferred  to 
them,  as  well  as  all  other  property  which  may  hereafter  be 
transferred  to  them,  or  which  they  may  acquire  as  such  trus- 
tees, together  with  the  proceeds  thereof,  and  all  monies  and 
securities  accruing  therefrom  hereafter  received  by  them  in 
trust  as  joint  tenants  and  not  as  tenants  in  common  to  man- 
age, invest,  reinvest  and  dispose  of  the  same,  and  to  collect 
receive  and  distribute  the  income  and  profits  therefrom  for 
the  benefit  of  the  holders,  from  time  to  time  of  the  certificates 
of  shares  from  time  to  time,  issued  and  outstanding  here- 
under, in  the  manner  and  subject  to  the  stipulations  and  limi- 
tations herein  contained,  to-wit; 

( 1 )  The  Trustees  in  their  collective  capacity  and  so  far 
as  practicable  and  convenient,  shall  be  designated  by,  and  shall 
act  under  the  name  of  the  Davis  Coggins  Oil  Co.  and  under 
that  name,  so  far  as  practicable,  shall  conduct  all  business 
and  execute  all  instruments  in  writing  in  performance  of  their 
trust. 

(2)  The  said  Trustees  shall  always  be  three  in  number, 
unless  their  number  shall  be  changed  by  an  amendment  of 
these  articles  of  agreement  adopted  in  the  manner  hereinafter 
prescribed  and  the  said  J  C  Davis  shall  hold  office  until 
their  annual  meeting  of  the  shareholders,  and  the  said  B  F 
Coggins  shall  hold  office  until  the  second  annual  meeting  of 
the  shareholders,  and  the  said  J  Fred  Smith  shall  hold  office 
until  the  first  annual  meeting  of  the  shareholders,  except  that 
all  of  said  trustees,  as  well  as  any  trustee  hereafter  elected, 
shall  in  all  cases  hold  office  until  their  successors  have  been 
elected  and  accepted  this  trust. 


Appendix.  429 

The  shareholders  at  each  annual  meeting  or  adjournment 
thereof,  shall  elect  the  required  number  of  trustees  to  fill  all 
vacancies  occurring  in  the  Board  of  Trustees,  by  resignation 
inability  to  act,  failure  to  accept  this  trust,  or  expiration  of 
term  of  office,  and  trustees  so  elected  shall  serve  for  a  period 
of  three  years  the  Board  of  Trustees,  however,  shall  fill  all 
vacancies  occuring  ad  interim  and  the  trustees  so  selected 
shall  hold  office  until  the  next  annual  meeting  of  the  share- 
holders. 

(3)  Shareholders  in  said  company  shall  have  no  legal 
right  to  the  trust  property,  either  real  or  personal  or  any 
character  held  from  time  to  time  by  the  Trustees;  and  es- 
pecially shall  they  have  no  right  to  call  for  any  partition  of 
the  trust  property  or  dissolution  of  the  trust,  but  the  shares 
shall  be  personal  property  carrying  the  right  of  division 
of  the  profits,  and,  at  the  termination  of  said  trust,  resulting 
either  from  the  expiration  of  the  period  fixed  for  its  existence 
or  from  the  dissolution  of  the  company  otherwise  efifected,  the 
division  of  the  principal  and  profits. 

(4)  The  death,  insolvency  or  bankruptcy  of  a  shareholder, 
the  transfer  of  his  interest  by  sale,  gift,  devise,  descent  or 
otherwise  during  the  continuance  of  said  trust,  shall  not  oper- 
ate as  a  dissolution  of  said  Company  or  terminate  the  trust, 
nor  shall  it  have  any  effect  whatsoever  upon  the  company,  its 
operation  or  mode  of  business;  nor  shall  it  entitle  his  heirs, 
assigns,  or  representatives  to  an  account  or  to  take  any  action 
in  the  courts,  in  law  or  equity  against  the  company,  its  mem- 
bers, trustees,  officers,  or  its  property,  or  business  operations 
which  shall  remain  intact  and  undisturbed  thereby  but  they 
shall  simply  and  only  succeed  to  the  rights  of  the  original 
member  of  shareholders. 

(5)  The  Trustees   shall  have  and   exercise  the  exclusive 


430  Trusts  for  Business  Purposeis. 

management  and  control  of  all  property  at  any  time  belonging 
to  this  trust,  with  all  the  rights  and  powers  of  absolute  own- 
ers thereof,  subject  only  to  the  purposes  of  this  agreement, 
they  may  adopt  constitution  and  By  laws,  not  inconsistent 
with  these  articles  of  agreement,  or  the  laws  of  this  State  or 
of  the  United  States  and  adopt  and  use  a  common  seal ;  they 
shall  have  the  power  to  vote  in  person  or  by  proxy  any  stock 
belonging  to  the  trust  and  to  collect,  receive  and  receipt  for 
the  dividends  thereof ;  to  contract  with  any  and  all  companies 
in  which  they  may  hold  stock  as  trustees  in  respect  to  any 
matters  or  matters  relating  to  the  business  of  any  such  com- 
pany or  companies ;  to  collect,  receive,  sue  for,  and  receipt  for, 
all  sums  of  money  at  any  time  coming  due  to  said  trust;  to 
employ  counsel;  to  begin,  prosecute  and  settle  suits  at  law  in 
equity  or  otherwise  and  to  compromise  or  refer  to  arbitration 
in  favor  of  or  against  the  Trustees. 

(6)  The  Trustees  shall  by  a  vote  of  a  majority  of  the 
Board  have  full  power  to  do  all  things  in  their  judgement 
necessary  and  prudent  in  the  management  and  conduct  of  the 
business  of  the  Trust,  same  being  the  manufacture  and  sale 
of  the  products  of  petroleum  the  production  of  oil,  gas  or 
other  minerals,  the  transportation  of  the  same  or  of  any  of 
the  manufactured  products  thereof;  and  the  engaging  in  the 
general  merchandise  of  said  articles,  or  the  doing  of  either 
or  any  of  said  things,  or  anything  properly  incident  thereto 
and  further,  in  the  conduct  of  the  business  to  execute  con- 
tracts in  the  name  of  the  Davis  Coggins  Oil  Co.  or  in  names 
of  the  trustese,  as  may  be  necessary  or  convenient;  to  pur- 
chase, contract  for,  lease  or  otherwise  acquire  such  property, 
make  such  repairs,  extensions  and  additions  as  they  may  deem 
necessary  or  proper,  to  sell  and  convey  any  part  of  the  prop- 
erty of  the  Trust;  to  borrow  money  on  the  credit  of  the 


Appendix.  431 

Trust,  and  if  in  their  judgmement  necessary  or  advisable, 
issue  mortgage  debentures  therefor,  secured  by  a  mortgage 
or  deed  of  trust  upon  the  property  of  the  trust,  executed  upon 
such  terms  as  they  may  deem  proper :  and  generally  to  do  all 
things  they  may  deem  necessary  or  advisable  for  the  successful 
management  of  the  business  and  afifairs  of  the  trust. 

(7)  At  any  meeting  of  the  shareholders  at  which  a  ma- 
jority of  the  shares  are  present  or  represented  they  may,  by  a 
vote  of  the  holders  of  a  majority  of  the  shares  present  advise 
the  trustees  as  to  the  management  of  the  business  of  the 
Company  or  upon  any  subject  which  may  be  pending  but 
no  advice  or  instructions  so  given  shall  in  any  way  impair  or 
defeat  the  powers  herein  conferred. 

(8)  The  Trustees,  the  survivor  or  survivors  of  them,  their 
successors  and  their  survivor  or  survivors,  shall  have  no  power 
to  bind  the  shareholders  personally,  and  in  every  written 
contract  they  shall  enter  into,  reference  shall  be  made  to  this 
declaration  of  trust,  and  the  person  firm  or  corporation  so 
contracting  with  them,  shall  look  only  to  the  funds  and  prop- 
erty of  the  Company  under  said  contract  and  for  the  pay- 
ment of  any  debt,  damage,  judgment  or  decree,  or  of  any 
money  that  may  become  due  and  payable  in  any  way  by  rea- 
son thereof ;  and  neither  any  trustees,  nor  the  shareholders 
present  or  future,  shall  be  personally  liable  therefor,  or  for 
any  debt  incurred,  or  engagement  or  contract  made  by  the 
Board  of  Trustees  or  any  officer  agent  or  servant,  acting 
under  them  on  behalf  of  the  company. 

The  funds  and  property  of  the  company  shall  stand  pri- 
marily charged  with  the  burden  of  paying  any  claim  or  money 
demand  established  or  existing  on  account  of  the  operations 
and  business  of  the  company  whether   founded  on  contract 


432  Trusts  for  Business  PuRrosEis. 

or  tort  to  the  end  that  the  members,  of  the  company  may  be 
protected  from  personal  liability. 

(8)  In  all  deeds  and  conveyances  to  said  trustees,  or  any 
of  them,  or  to  their  successors  or  any  of  them,  it  shall  be  set 
forth  that  such  grant,  conveyance  or  transfer  is  to  him  or 
them  as  Trustees  of  the  Davis  Coggins  Oil  Co.  to  be  held 
subject  to  this  Declaration  of  trust. 

(9)  The  company  may  sue  or  be  sued  in  the  Company's 
name  as  provided  by  law;  or  suit  may  be  brought  or  defended 
in  the  names  of  the  trustees. 

(10)  Stated  meetings  of  the  trustees  shall  be  held  as  they 
may  from  time  to  time,  by  vote  or  by  law,  prescribe,  and 
other  meetings  shall  be  held  from  time  to  time  upon  the  call 
of  the  president  or  three  trustees.  A  majority  of  the  board 
shall  constitute  a  quorum,  and  the  concurrence  of  all  the 
trustees  shall  not  be  necessary  to  the  validity  of  any  action 
done  by  them,  but  the  wish  of  the  majority  of  the  trustees 
present  and  voting  at  any  meeting  as  evidenced  by  a  resolu- 
tion of  such  majority  shall  be  conclusive  and  the  trustees 
may  make  adopt  amend  or  repeal  any  such  by  laws,  rules  and 
regulations  not  inconsistent  with  the  terms  of  this  instrument 
or  the  laws  of  tliis  state  or  of  the  United  States,  as  they  may 
deem  necessary  or  desirable  for  the  conduct  of  their  business 
and  for  the  government  of  themselves  and  their  agents,  serv- 
ants and  representatives. 

(11)  Trustees  shall  elect  from  among  their  number  a 
president  and  vice  president  of  the  board,  and  shall  also  elect 
a  secretary  treasurer  and  they  shall  have  authority  to  appoint 
such  other  officers  agents  and  attorneys  as  they  may  from 
time  to  time  deem  necessary  or  expedient,  and  they  shall  have 
authority  to  accept  resignations  and  to  fill  any  vacancies,  and 
shall  likewise  have   authority  to  elect  temporary  officers  to 


Appendix.  433 

serve  during  the  absence  or  disability  of  regular  officers,  and 
the  duties  of  the  offices  so  created  shall  be  such  as  are  pre- 
scribed in  the  by  laws,  rules,  and  regulations  adopted  by  the 
trustees. 

(12)  The  Trustees  shall  not  be  liable  for  errors  of  judg- 
ment either  in  holding  property  originally  conveyed  to  them 
or  in  acquiring  and  afterwards  holding  additional  property, 
nor  for  any  loss  arising  out  of  any  investment,  nor  for  any 
act,  or  omission  to  act,  perform  or  omitted  by  them,  in  the 
execution  of  this  trust  in  good  faith,  nor  shall  they  or  any 
or  either  of  them,  be  liable  for  the  acts  or  omission  of  such 
other,  or  of  any  officer,  agent  or  servant  appointed,  by  or 
acting  for  them,  and  they  shall  not  be  obliged  to  give  any 
bond  to  secure  the  due  performance  of  this  trust  by  them. 

(13)  The  shares  herein  provided  for  may  be  divided  into 
preferred  and  common  shares.  The  preferred  shares  shall 
entitle  the  holder  to  such  dividends,  payable  at  such  time, 
as  the  trustees  may  specify,  and  they  may  also  provide  that 
in  case  of  liquidation  the  proceeds  of  the  liquidation  shall  be 
first  applied  to  the  payment  of  registered  holders  of  preferred 
shares,  and  any  accrued  and  unpaid  dividends  thereon  and 
that  the  balance  remaining  thereafter  shall  be  divided  among 
the  registered  holder  of  common  shares.  As  evidence  of  the 
ownership  of  said  shares,  the  trustees  shall  cause  to  be  issued 
to  each  shareholder  a  negotiable  certificate  or  certificates, 
which  certificates  shall  be  in  such  form  as  they  may  prescribe, 
but  such  certificate  shall  only  evidence,  the  interest  that  the 
holder  thereof  has  in  the  property  belonging  to  this  trust,  to 
be  held  subject  to  the  articles  of  this  agreement,  and  such  by 
laws  rules  and  regulations  as  the  trustees  may  hereafter  adopt. 

(14)  The  fiscal  years  of  this  Trust  shall  end  on  the  first 
Monday  of  January  of  each  year.     Annual  meetings  for  the 


434  Trusts  for  Busine;ss  Purposes. 

election  of  the  trustees  and  for  the  transaction  of  other  busi- 
ness shall  be  held  in  the  town  of  Wichita  Falls,  Texas,  on  the 
first  Monday  of  January  in  each  year  beginning  with  the  first 
Monday  of  January  191 8,  of  which  meetings  notice  shall  be 
given  by  the  Secretary  by  mail,  tO'  each  shareholder,  at  his 
registered  address,  at  least  ten  days  before  such  meeting. 

(15)  Special  meetings  of  the  shareholders  may  be  called 
at  any  time,  after  ten  days,  notice,  given  by  order  of  the 
President  or  two  trustees.  At  all  meetings  of  the  sharehold- 
ers, each  holder  of  the  common  shares  shall  be  entitled  to  one 
vote  for  each  share  held  by  him,  and  any  shareholder  may 
vote  by  proxy,  but  the  holder  of  preferred  stock  shall  not  have 
the  voting  privilege. 

No  special  business  shall  be  transacted  at  any  meeting  of 
the  shareholders,  unless  notice  of  such  business  has  been  given 
in  the  call  for  the  meeting. 

No  business  except  to  adjourn  shall  be  transacted  at  any 
meeting  of  the  shareholders  unless  the  holders  of  a  majority 
of  all  the  common  shares  outstanding  are  present  in  person  or 
by  proxy. 

(16)  This  trust  shall  continue  for  the  term  of  21  years 
after  the  death  of  the  last  survivor  of  the  said  J  C  Davis, 
B  F  Coggins  and  J  Fred  Smith,  at  which  time  the  then  board 
of  trustees  shall  proceed  to  wind  up  its  afifairs,  liquidate  its 
assets,  and  distribute  the  same  among  the  holders  of  preferred 
and  common  shares  according  to  the  priorities  hereinbefore 
expressed;  provided,  however,  that  if  prior  to  the  expiration 
of  said  period,  the  holders  of  at  least  two  thirds  of  the  shares 
then  outstanding,  shall,  at  a  meeting  called  for  that  purpose 
vote  to  terminate  or  renew  this  trust,  then  said  trust  shall 
either  terminate  or  be  renewed  and  continue  in  existence  for 
such   further  period  as  may  then  be  determined,  not  incon- 


I 


Appendix.  435 

sistent  with  the  laws  of  this  State  or  of  the  United  States. 

Provided  further  however,  that  upon  request  of  the  holders, 
of  at  least  two  thirds  of  the  shares  of  the  common  stock  out- 
standing by  vote  or  resolution  thereof  at  a  meeting  of  the 
shareholders  called  for  that  purpose  the  trustees  may,  if  it 
seems  to  them  judicious  so  to  do,  convey  the  trust  property 
to  new  or  other  trustees,  subject  to  the  terms  of  such  request 
and  in  the  manner  stated  therein  being  first  duly  indemnified 
for  any  outstanding  obligations  provided  further,  however, 
that  nothing  in  this  provision  contained  shall  be  construed  as 
making  it  obligatory  upon  the  trustees  to  comply  with  such 
request.  For  the  purpose  of  winding  up  its  affairs  and  liqui- 
dating the  assets  of  the  trust  the  then  board  of  trustees  shall 
continue  in  office  until  such  duties  have  been  duly  performed. 

(17)  This  Agreement  and  Declaration  of  Trust  may  be 
amended  or  altered  except  as  regards  the  liabilities  of  the 
trustees,  with  the  consent  of  the  holders  of  at  least  two  thirds 
of  the  shares  of  the  common  stock  outstanding,  provided 
notice  of  the  proposed  amendment  or  alteration  shall  be  given 
in  the  call  for  the  meeting,  and  in  case  of  such  alteration  or 
amendment,  the  same  shall  be  attached  to  and  made  a  part 
of  this  agreement. 

(18)  This  instrument  as  well  as  any  amendment  thereto 
shall  be  recorded  in  any  county  or  counties  in  which  the  trus- 
tees shall  undertake  to  do  business,  and  the  trustees  shall  sign 
and  acknowledge  the  Constitution  and  By  laws  and  all  amend- 
ments thereto  in  the  form  prescribed  by  laws  to  entitle  them  to 
registration,  and  the  same  may  be  recorded  in  any  County  or 
counties  in  which  the  trustees  undertake  to  do  business,  when- 
ever, they  deem  it  necessary  or  advisable  to  do  so. 

In  Witness  Whereof  we  the  Subscribers  and  we  the  Trus- 


436  Trusts  for  Business  Purposes. 

tees  hereto  sign  our  names,  this  the  4th  day  of  January  19 18. 

J  C  Davis  J.  C.  Davis 

B  F  Coggins  B.  F.  Coggins 

J  Fred  Smith  J  Fred  Smith,  Trustees. 

A  C  Parker 

W  F  Reynolds,  Subscribers. 

The  State  of  Texas 
County  of  Wichita 

Before  me,  the  undersigned  authority,  on  this  day  person- 
ally appeared  J  C  Davis,  J  Fred  Smith  and  A  C  Parker  and 
W.  F.  Reynolds,  known  to  me  to  be  the  persons  whose  names 
are  subscribed  to  the  foregoing  instrument,  and  acknowledged 
to  me  that  they  executed  the  same  for  the  purposes  and  con- 
sideration therein  expressed,  in  the  capacity  therein  stated. 

Given  under  my  hand  and  seal  of  office  this  the  4th  day  of 

January  1918. 

(seal)  Jas  A  Griffin,  Notary  Public 

Wichita  County,  Texas. 

The  State  oE  Texas 
County  of  Wichita 

Before  me,  the  undersigned  authority,  on  this  day  person- 
ally appeared  B  F  Coggins  known  to  me  to  be  the  person  whose 
name  is  subscribed  to  the  foregoing  instrument,  and  acknowl- 
edged to  me  that  he  executed  the  same  for  the  purposes  and 
consideration  therein  expressed,  in  the  capacity  therein  stated. 

Given  under  my  hand  and  seal  of  office  this  the  21st  day  of 
January   1918. 

(seal)  Edna  Doke,  Notary  Public, 

Wichita  County,  Texas. 


Appendix.  437 

THE  PEPPERELL  MANUFACTURING  CO. 

THIS  AGREEMENT  AND  DECLARATION  OF  TRUST 
made  this  fifteenth  day  of  March,  A.  D.  1915,  at  Biddeford, 
in  the  State  of  Maine,  (Malley  &  Bowditch,  259  Fed. 
809,  7  A.  L.  R.  608). 

WITNESSETH: 

Preamble;. 

That  Whereas  the  stockholders  and  directors  of  PeppER- 
EEE  Manufacturing  Company,  a  Maine  Corporation  carry- 
ing on  business  at  Biddeford,  in  the  State  of  Maine,  deem  it  for 
the  advantage  of  the  interests  in  said  company  and  business  to 
transfer  the  property  and  assets  of  said  company  to  a  trust 
organized  in  accordance  with  the  provisions  of  this  agreement, 
and  have  passed  such  votes  and  done  such  acts  and  things  as  are 
required  to  authorize  such  transfer;  and 

Whereas  by  deed  of  even  date  herewith  and  to  be  recorded, 
and  by  other  instruments  of  assignment  and  transfer  said  prop- 
erty and  assets  have  been  conveyed  and  transferred  to  James 
Longley,  Charles  P.  Bowditch,  Francis  C.  Welch,  George 
Wigglesworth,  Philip  Dexter,  Philip  Y.  De  Normandie,  and 
William  Amory,  as  trustees  hereunder,  to  which  deeds  and  in- 
struments of  assignment  and  conveyance  reference  is  hereby 
made  for  a  more  particular  description  of  said  property  and 
assets ; 

Decearation  of  Trust. 

Now  Therefore  we,  the  said  James  Longley,  Charles  P. 
Bowditch,  Francis  C.  Welch,  George  Wigglesworth.  Philip 
Dexter,  Philip  Y.  De  Normandie,  and  William  Amory,  do  here- 


438  Trusts  for  Business  Purposes. 

by,  for  ourselves  and  our  heirs,  executors,  administrators  and 
assigns  and  our  successors,  as  trustees  hereunder,  declare  and 
agree  that  we  will  hold  the  said  property  as  well  as  all  other 
property  which  we  may  acquire  as  trustees  hereunder  together 
with  all  proceeds  and  earnings  thereof  upon  and  for  the  trusts, 
uses  and  purposes  herein  set  out : 

Name. 

1.  The  name  of  this  trust  shall  be  Pepperell  Manufacturing 
Company  and  the  trustees  may  be  so  designated,  and  in  that 
name  the  trustees  shall,  so  far  as  practicable,  conduct  the  busi- 
ness of  the  trust  and  execute  all  instruments  in  writing.  Any 
property  conveyed  to  the  trustees  under  the  above  designation 
or  as  trustees  of  said  Company  shall  be  held  by  them  as  joint 
tenants  as  trustees  under  this  instrument. 

Capital. 

2.  The  capital  of  this  trust  shall  be  seven  million  six  hun- 
dred and  sixty-eight  thousand  dollars  ($7,668,000)  divided  for 
the  purpose  of  issuing  certificates  into  76,680  shares  of  the  par 
value  of  one  hundred  dollars  ($100)  each. 

Certificates. 

The  holders  of  said  shares  sliall  be  entitled  as  evidence  there- 
of to  certificates  executed  and  delivered  by  the  trustees  in  sub- 
stantially the  form  following,  namely: 

PEPPERELL  MANUFACTURING  COMPANY. 

(Issued  under  Agreement  and  Declaration  of  Trust  dated 
March  15,  191 5.) 


Appe;ndix.  439 

No.  Shares. 

This  is  to  certify  that  is 

the  owner  of  shares  of  the  par  vakie  of 

one  hundred  dollars  ($ioo)  each  of  the  Pepperell  Manu- 
facturing Company,  subject  to  the  provisions  of  an  Agree- 
ment and  Declaration  of  Trust  dated  March  15,  191 5,  and 
on  file  with  Saco  and  Biddeford  Savings  Institution  in  Saco, 
Maine,  which  is  hereby  referred  to  and  made  a  part  of  this 
certificate. 

This  certificate  is  transferable  only  subject  to  the  pro- 
visions of  said  Agreement  and  Declaration  of  Trust  and 
only  by  transfer  upon  the  books  of  the  Trustees  upon  sur- 
render of  this  certificate  properly  endorsed.  This  certifi- 
cate is  not  valid  until  countersigned  by  Boston  Safe  De- 
posit and  Trust  Company,  Transfer  Agent,  which  signs 
merely  to  indicate  that  the  shares  represented  by  this  and 
all  other  outstanding  certificates  bearing  its  signature  do 
not  exceed  the  total  shares  herein  authorized. 
In  Witness  Whereof  the  Trustees  under  said  Agreement 

and  Declaration  of  Trust  have  caused  the  name  of  said  Trust 

to  be  signed  hereto  and  its  common  seal  to  be  hereto  afifixed 

by  their  President,  and  attested  by  their  Treasurer,  this 

day  of  A.  D.  19 

PEPPERELL  MANUFACTURING  COMPANY, 

By 

President. 

Attest : 

Treasurer. 

Countersigned : 

BOSTON   SAFE  DEPOSIT  AND   TRUST   COMPANY, 

Transfer  Agent, 

By 

(Form  of  Transfer  ) 

For  value  received  the  undersigned  hereby  sells,,  as- 
signs and  transfers  to 


440  Trusts  for  Busine:ss  Purposes. 

shares  in  Pepperell  Manufacturing  Company  mentioned  in 

the  within  certificate. 

Dated: 

Witness: 

Loss,  etc.,  of  Certificates. 

In  case  of  mutilation,  destruction  or  loss  of  any  certificate 
hereunder  the  trustees  may  issue  a  new  certificate  on  such  terms 
as  they  may  think  fit  in  suhstitution  for  the  certificate  so  muti- 
lated, destroyed  or  lost. 

Duration  of  Trust. 

3.  This  trust  unless  sooner  terminated  as  herein  provided 
shall  continue  for  a  term  of  twenty  (20)  years  next  after  the 
death  of  the  last  sur\'ivor  of  the  following  named  persons: 
William  Appleton  Coolidge  and  John  Linzee  Coolidge,  children 
of  T.  Jefferson  Coohdge,  Junior,  late  of  Manchester,  Mass., 
deceased ;  Robert  Winthrop,  Frederic  Winthrop,  Jr.,  and  John 
Winthrop,  children  of  Frederic  Winthrop,  of  Hamilton,  Mass. ; 
Barbara  Welch  and  Francis  Clarke  Welch,  Second,  children  of 
E.  Sohier  Welch,  of  Weston,  Mass.;  William  Dexter,  son  of 
Philip  Dexter,  of  Boston,  Mass. ;  Mary  Stockton  and  Charles 
H.  Stockton,  children  of  Phihp  Stockton,  of  Manchester, 
Mass.;  Theresa  De  Normandie  and  Elsie  De  Normandie, 
children  of  Philip  Y.  De  Normandie,  of  Milton,  Mass. 

Purposes  and  Powers  of  Trustees. 

4.  The  trustees  shall  employ  and  use  the  trust  property  and 
assets  in  the  carrying  on  of  the  business  of  manufacturing  tex- 
tile or  other  fabrics  and  the  component  parts  thereof  from  cot- 
ton or  other  materials  and  buying,  selling  and  dealing  in  and 
with  the  same.    The  trustees  shall  have,  without  other  or  fur- 


Appendix.  441 

ther  authorization,  full  and  absolute  power,  control  and  author- 
ity over  the  trust  property  held  by  them  at  any  time  hereunder 
and  over  the  business  of  the  trust  to  the  same  extent  as  if  the 
trustees  were  the  sole  owners  of  such  property  and  business  in 
their  own  right,  subject  only  to  the  limitations  herein  expressly 
stated  and  to  the  superior  control  of  the  shareholders.  With- 
out restricting  the  generality  of  the  foregoing  such  powers  shall 
include  among  others  the  following : 

(a)  To  carry  on  the  business  aforesaid;  to  own  or 
operate  under  letters  patent  and  trade  marks ;  to  buy,  own, 
sell,  lease  or  develop  real  and  personal  property  and  water 
power ;  to  buy,  own,  sell,  lease,  erect  or  operate  mills,  dams, 
power  plants  and  other  structures;  to  produce  power  by 
steam,  water,  electricity  or  other  agency  and  to  utilize  and 
sell  the  same  but  not  thereby  or  otherwise  to  engage  in  any 
business  as  a  public  service  company  except  so  far  as  may 
be  from  time  to  time  permitted  by  law ;  to  do  any  and  all 
things  necessary  or  proper  to  effect  or  which  may  be  in- 
cidental to  any  or  all  of  the  foregoing,  and  either  as  inci- 
dental thereto,  or  otherwise,  to  purchase,  own,  vote  upon 
and  dispose  of  the  stock  of  corporations  or  associations, 
including  shares  issued  hereunder,  bonds  and  other  securi- 
ties and  to  collect  dividends  or  interest  thereon. 

(b)  To  establish  and  carry  on  the  business  above- 
mentioned  or  any  similar  businesses  at  any  other  place  or 
places,  whether  in  the  State  of  A-Iaine  or  elsewhere  and 
either  directly  or  through  any  controlled  corporation  or 
association ;  to  construct  and  equip  or  to  purchase  or  other- 
wise acquire,  plants  for  such  businesses  with  all  proper  ap- 
purtenances thereto  and  the  same  to  sell,  mortgage  or 
othenvise  dispose  of ;  and  to  contract  generally  with  any 
controlled  corporation  or  association. 

(c)  To  employ  such  agents  as  the  trustees  shall  think 
proper  in  their  discretion  for  the  management  of  the  trust 
property  and  assets  and  the  management  and  carrying  on 
of  any  business  herein  authorized  and  to  act  through  such 
agents  to  the  extent  they  deem  wise. 

(d)  To  pay  all  taxes,  assessments  and  any  and  all  nec- 
essary and  proper  expenses  in  connection  with  the  man- 


442  Trusts  for  Business  Purposes. 

agement  of  the  trust  property  and  assets,  or  the  carrying 
on  of  the  business  of  the  Company,  including  the  purchase 
of  any  forms  of  insurance  the  trustees  may  deem  advisable. 
(e)  To  adopt  and  use  a  common  seal. 
(/)  To  collect,  sue  for,  receive  and  receipt  for  all  sums 
of  money  at  any  time  coming  due  to  the  Company;  to 
employ  counsel;  to  begin  and  prosecute  or  to  defend  any 
actions  or  suits  at  law,  in  equity  or  otherwise,  and  to  com- 
promise or  adjust  any  such  actions  or  suits  or  any  contro- 
versy or  dispute  or  any  claim,  demand  or  thing  relating  to 
the  Company's  property  or  business,  or  to  refer  to  arbitra- 
tion any  of  the  foregoing. 

(g)  To  borrow  money  for  any  purpose  herein  author- 
ized; to  give  notes,  or  to  enter  into  obligations  or  con- 
tracts of  suretyship  or  guaranty,  and  to  secure  such  notes 
or  obligations  by  a  mortgage  or  pledge  of  any  personal 
property  of  the  Company,  but  such  notes  or  contracts  of 
suretyship  or  guaranty  shall  not  be  valid  unless  counter- 
signed by  at  least  one  of  the  trustees,  in  addition  to  the 
duly  authorized  signature  thereto  on  behalf  of  the  Com- 
pany ;  to  loan  money  and  to  invest  any  funds  of  the  Com- 
pany as  they  may  deem  wise. 

(h)  To  cause  to  be  organized  a  corporation  or  corpo- 
rations under  the  laws  of  any  jurisdiction,  or  any  other 
trust  or  trusts,  to  take  over  the  trust  property  or  any  part 
or  parts  thereof,  and  to  sell,  convey  and  transfer  such 
trust  property  or  such  part  or  parts  to  such  corporation  or 
corporations,  trust  or  trusts,  in  exchange  for  the  shares  or 
securities  thereof,  or  otherwise. 


Exemption  of  Shareholders. 

The  holders  of  the  shares  are  hereby  declared  to  be  cestuis 
que  trust  and  not  partners,  and  nothing  herein  contained  shall 
constitute  the  trustees  or  the  shareholders  or  any  of  them  part- 
ners with  one  another  or  with  any  person,  firm,  association  or 
corporation,  or  shall  render  them  or  any  of  them  personally 
liable  for  any  debt,  contract  or  obligation  or  liability  entered 
into  or  incurred  in  respect  of  this  trust  or  by  the  trustees  or 


Appendix.  443 

officers  or  any  of  them;  and  neither  the  trustees  nor  the  offi- 
cers of  this  trust  shall  have  any  power  to  bind  shareholders  per- 
sonally by  any  contract,  express  or  implied  (either  in  the  names 
of  the  trustees  or  in  the  name  of  the  trust),  or  by  any  act, 
neglect  or  default,  and  in  every  contract  which  they  make,  of 
whatever  nature,  whether  in  the  name  of  the  trustees  or  in  the 
name  of  the  trust,  reference  shall  be  made  to  this  Declaration 
of  Trust,  and  any  corporation,  person  or  persons  contracting 
with,  extending  credit  to  or  having  any  claim  against  the  trus- 
tees or  the  trust  shall  look  only  to  the  funds  and  property  of 
the  trust  for  the  performance  of  such  contract  or  for  the  pay- 
ment of  any  debt,  mortgage,  judgment  or  decree,  or  of  any 
money  that  may  become  due  or  payable  under  the  authority  or 
by  reason  of  the  failure  or  neglect  of  any  trustees  or  any  officers 
of  the  trust,  and  neither  the  trustees  nor  any  present  or  future 
shareholders  shall  ever  be  personally  liable  therefor. 

ExE;MP'rioN  OF  Purchasers,  etc. 

5.  No  purchaser  or  mortgagee  of  any  property  from  the 
trustees  nor  any  lender  to  them  shall  in  any  event  be  bound  to 
see  to  or  be  affected  by  the  application  of  such  purchase  money 
or  money  lent.  The  receipts  of  any  two  of  the  trustees,  or  the 
Treasurer  of  the  Company,  or  either  of  them,  for  moneys  or 
things  paid  or  delivered  for  the  trust  shall  be  effectual  dis- 
charges therefrom  to  the  persons  paying  or  delivering  the  same. 

Title  to  Trust  Property  and  Interest  op  Shareholder. 

6.  The  title  to  the  trust  property  of  every  name  and  nature, 
and  the  right,  power  and  authority  to  carry  on  and  conduct  the 
business  of  the  trust  shall  be  vested  solely  in  the  trustees.  No 
shareholder  shall  be  deemed  to  have  any  legal  title  to  any  of 


444  Trusts  for  Business  Purposes. 

the  trust  property  or  assets,  but  the  interest  of  the  shareholders 
shall  be  deemed  to  be  equitable  only  and  they  shall  have  no  right 
to  call  for  any  partition  or  division  of  any  of  the  trust  property 
or  any  profits,  rights  or  interests  therein  during  the  continuance 
of  the  trust.  The  death  of  a  shareholder  during  the  continu- 
ance of  the  trust  shall  not  operate  to  determine  the  trust  nor 
sliall  it  entitle  the  legal  representatives  of  such  shareholder  to 
an  accounting  or  to  take  any  action  in  the  courts  or  otherwise 
against  the  trustees  or  the  property  held  hereunder,  but  the 
legal  representatives  of  such  shareholder  shall  succeed  to  all  his 
rights  under  this  trust,  and  upon  the  surrender  of  the  certificate 
or  certificates  of  such  shareholder  the  trustees  may  issue  a  new 
certificate  or  certificates  for  such  sliares  to  the  executor  or  ad- 
ministrator of  such  shareholder  and  so  doing  shall  be  without 
liability. 

Record  of  Shareholders  Conclusive. 

7.  The  name  or  names  in  which  any  of  the  shares  issued  or 
to  be  issued  hereunder  shall  be  recorded  on  the  books  of  the 
trustees  shall  be  deemed  conclusive  evidence  of  ownership  and 
the  trustees  may  pay  any  and  all  dividends  upon  such  shares  to 
such  record  holders.  And  said  trustees  shall  not  be  under  any 
obligation  to  take  notice  or  to  inquire  as  to  the  rights  of  any 
assignee  or  pledgee  in  the  absence  of  any  transfer  of  record  to 
such  assignee  or  pledgee ;  and  all  payments  made  in  accordance 
herewith  shall  be  deemed  duly  made  and  the  trustee  discharged 
with  respect  thereto. 

Anv  and  all  notices  to  which  shareholders  hereunder  may 
be  entitled,  and  any  communications  of  or  in  respect  to  any 
matter  or  thing  hereunder,  shall  be  deemed  duly  served  if 
mailed,  postage    prepaid,  addressed  to  shareholders  of  record 


Appe;ndix.  445 

at  their  last  known  residences  or  places  of  business  as  recorded 
on  the  books  of  the  trustees. 

Trustees'  Names,  Term  oe  Oefice,  etc. 

8.  The  trustees  shall  always  be  seven  (7)  in  number.  The 
trustees  herein  named  as  such  shall  hold  office  until  the  next 
annual  meeting  of  the  sliareholders.  The  term  of  office  of  the 
trustees  shall  be  one  year  and  shall  expire  at  the  next  annual 
meeting  following  their  election,  subject,  however,  to  the  pro- 
visions for  holding  over,  as  hereinafter  set  out. 

FiscAE  Periods. 

The  fiscal  year  of  the  trustees  shall  be  divided  into  two 
periods,  ending  respectively  June  30  and  December  31  in  each 
year. 

Annual  Meetings  oe  Shareholders. 

All  meetings  of  the  shareholders  of  the  trust  shall  be  held 
at  such  place  in  the  State  of  Maine  as  shall  be  from  time  to 
time  designated  by  the  trustees  and  specified  in  the  notice  of 
the  meeting.  The  annual  meetings  of  the  shareholders  of  the 
trust  shall  be  held  on  the  third  Thursday  of  October  in  each 
year,  at  which  meeting,  or  at  any  adjournment  thereof,  the  said 
shareholders  shall  elect  seven  (7)  trustees  to  serve  for  the 
ensuing  year. 

Special  Meetings  of  Shareholders. 

Special  meetings  of  the  shareholders  of  the  trust  may  be  called 
by  the  President  at  any  time  and  shall  be  called  upon  written 
request  of  the  holders  of  five  (5)  per  cent  in  amount  of  the 
outstanding  shares,  and  at  special  meetings  no  business  shall 


446  Trusts  for  Business  Purposes. 

be  transacted  except  such  as  shall  liave  been  specified  in  the 
notice  therefor. 

In  case  by  oversight  or  for  any  other  reason  the  annual  meet- 
ing hereinbefore  provided  for  shall  be  omitted  the  acts  herein 
provided  to  be  done  at  such  annual  meeting  may  be  done  at  a 
subsequent  special  meeting  in  lieu  thereof  duly  called  as  in  this 
section  provided. 

Notice  of  Meetings. 

9.  Written  notice  of  all  meetings,  whether  annual  or  special, 
shall  be  given  by  the  President  or  Secretary  ten  (10)  days  at 
least  before  such  meeting.  Notice  of  any  meeting  may  be 
waived  by  any  shareholder  either  before  or  after  such  meeting. 

Proxies  and  Voting. 

10.  At  any  meeting  the  shareholders  may  vote  by  proxy. 
Only  shareholders  of  record  shall  be  entitled  to  vote,  and  each 
share  shall  be  entitled  to  one  vote.  If  the  holder  of  any  share 
hereunder  is  a  minor,  or  for  other  reason  subject  to  guardian- 
ship or  legal  control,  he  may  vote  by  guardian  or  by  such  other 
person  as  may  be  lawfully  authorized  thereto  and  such  vote 
may  be  given  in  person  or  by  proxy. 

Quorum. 

11.  At  any  meeting  of  the  shareholders,  the  shares  present 
shall  constitute  a  quorum,  and  a  majority  may  decide  upon  all 
matters  coming  before  the  meeting  except  as  herein  otherwise 
expressly  provided. 

Trustees'  Meetings,  etc. 

12.  Regular  meetings  of  the  trustees  shall  be  held  at  such 


Appendix,  447 

times  and  places  as  said  trustees  may  provide  and  special  meet- 
ings shall  be  held  at  any  time  upon  the  call  of  the  President  or 
any  four  of  the  trustees.  Notice  of  any  meeting  may  be  waived 
by  any  trustee  either  before  or  after  such  meeting.  A  majority 
of  the  trustees  shall  constitute  a  quorum  and  except  as  herein 
otherwise  provided,  any  action  taken  relating  either  to  matters 
of  discretion  or  otherwise  at  any  meeting  duly  held,  at  which  a 
quorum  is  present,  shall  be  effective  as  the  act  of  all  the  trus- 
tees; provided,  however,  that  in  case  of  any  action  relating  to 
the  borrowing  or  loaning  of  money,  the  establishment  of  new 
plants  by  purchase  or  otherwise,  or  the  establishment  of  any 
new  branch  of  business,  the  concurrence  of  at  least  four  trustees 
shall  be  required. 

Officers. 

13.  The  trustees  shall  annually  elect  from  among  their  num- 
ber a  president;  and  they  shall  also  annually  elect  a  secretary 
and  treasurer,  either  of  whom  may,  but  need  not,  be  a  trustee 
(which  latter  two  offices  may,  but  need  not,  be  held  by  the 
same  person)  ;  and  they  shall  have  authority  in  their  discretion 
to  appoint  further  vice-presidents,  assistant  secretaries,  assist- 
ant treasurers  and  such  other  officers  and  agents  as  they  may 
from  time  to  time  deem  advisable  and  to  confer  upon  all  such 
officers  and  agents  such  duties  and  obligations  as  they  may  de- 
termine. They  may  also  appoint  from  among  their  number  an 
executive  committee  of  three  or  more  persons  to  whom  they 
may  delegate  such  of  the  powers  herein  conferred  upon  the 
trustees  as  they  may  deem  expedient  except  as  herein  otherwise 
provided.  They  may  accept  resignations  of  any  officer  elected 
or  appointed  by  them  and  may  fill  such  vacancies  for  the  un- 
expired term.     They  may  likewise  accept  the  resignations  of 


448  Trusts  for  Business  Purposes. 

any  of  their  own  number  and  may  fill  any  vacancies  thus  caused 
or  otherwise  existing  in  their  number  until  the  next  annual 
meeting  of  the  shareholders. 

Compensation. 

14.  The  trustees  shall  fix  the  compensation,  if  any,  of  all 
officers  and  agents  appointed  by  them  and  may  also  pay  to  them- 
selves such  compensation  for  their  own  services  as  they  may 
deem  reasonable. 

By-IvAws,  etc. 

15.  The  trustees  may  make,  adopt,  amend  or  repeal  such 
by-laws,  rules  and  regulations  not  inconsistent  with  the  terms 
of  this  instrument  as  they  may  deem  necessary  or  desirable  for 
the  conduct  of  the  business  of  the  trust,  and  for  the  govern- 
ment of  themselves  and  their  officers,  agents,  servants  and  rep- 
resentatives. 

Strangers    May   Rely   on    Trustees'    Resolution   as   to 

Powers. 

16.  So  far  as  strangers  to  this  trust  are  concerned,  a  reso- 
lution of  the  trustees  authorizing  a  particular  act  to  be  done 
shall  be  conclusive  evidence  in  favor  of  such  strangers  that 
such  act  is  within  the  powers  of  the  trustees. 

Liability  of  Trustees. 

17.  The  trustees  shall  each  be  liable  only  for  his  own  acts 
and  not  one  for  another,  and  where  they  act  by  agents  or  serv- 
ants they  shall  not  be  liable  for  the  faults  of  such  agents  or 
servants  provided  they  have  used  due  care  in  the  selection  of 


Appendix.  449 

them.  No  trustee  at  any  time  acting  under  this  instrument 
shall  be  liable  for  errors  of  judgment  either  in  holding  prop- 
erty originally  conveyed  to  them  or  in  acquiring  or  afterwards 
holding  additional  property,  or  in  selling  or  disposing  of  any 
of  the  trust  property,  or  in  the  conduct  of  the  business  of  the 
trust,  nor  for  any  loss  arising  out  of  the  conduct  of  said  busi- 
ness; nor  for  any  loss  or  depreciation  in  value  of  any  of  the 
trust  property,  original  or  subsequently  acquired,  unless  such 
loss  or  depreciation  shall  have  been  directly  caused  by  his  own 
gross  negligence  or  dishonesty,  nor  for  any  loss  arising  out  of 
any  investment,  nor  for  any  act  or  omission  to  act  in  the  execu- 
tion of  this  trust  in  the  absence  of  bad  faith.  The  trustees  and 
each  of  them  shall  be  entitled  to  indemnity  from  the  trust  prop- 
erty for  any  personal  liability  which  may  be  incurred  in  the  ad- 
ministration of  said  trust  or  in  the  conduct  of  its  business,  ex- 
cept such  as  may  arise  from  wilful  default.  No  bond  or  other 
security  and  no  surety  or  sureties  shall  ever  be  required  of 
any  trustees  acting  hereunder,  in  their  capacity  as  trustees. 
Any  trustee  may  purcliase  or  acquire  shares  in  this  Trust  in 
all  respects  as  if  he  were  not  a  trustee. 

Dividends. 

1 8.  The  trustees  may  from  time  to  time  declare  and  pay 
dividends  out  of  the  net  profits  received  by  them,  or  out  of 
any  surplus,  but  the  amount  of  such  dividends  and  the  times 
of  declaration  and  payment  thereof  shall  be  wholly  in  the  dis- 
cretion of  the  trustees,  as  shall  also  the  determination  of  what 
constitutes  such  net  profits  or  surplus.  The  trustees  may  also 
determine  what  constitutes  depreciation  and  may  set  apart  such 
depreciation  and  reserve  funds  as  they  ma}^  think  proper. 


450  Trusts  for  Business  Purposes. 

Trust  Property  to  Vest  in  Succeeding  Trustees. 

19.  Upon  resignation,  decease,  removal  or  vacancy  for  any 
cause  in  any  ofifice  of  trustee  hereunder,  the  title  of  the  trust 
property  and  assets  shall  vest  in  the  remaining  trustees  and  upon 
the  filling  of  any  vacancy  the  said  title  shall  vest  in  the  ne^v 
trustees  jointly  with  the  old.  Any  outgoing  trustee  or  the  legal 
representatives  of  any  trustee  deceased  shall,  at  the  request  of 
the  remaining  trustees,  but  at  the  expense  of  the  trust,  execute, 
acknowledge  and  deliver  all  such  conveyances  and  instruments 
as  may  be  necessary  or  desirable  to  vest  the  title  of  said  trust 
property  and  assets  in  such  remaining  or  succeeding  trustees. 

The  trustees  for  the  time  being,  whether  surviving,  remain- 
ing or  substituted,  shall  be  vested  with  all  powers,  authorities, 
rights  and  discretions,  and  shall  be  subject  to  all  duties,  obliga- 
tions, limitations  and  restrictions  given  to  or  imposed  upon  the 
trustees  hereunder. 

Acceptance  of  Trust  by  New  Trustees. 

Upon  the  election  of  any  trustee  by  the  shareholders  or  by 
the  remaining  trustees,  he  shall  execute  an  acceptance  of  this 
trust,  which,  together  with  a  certificate  of  the  Secretary  or  As- 
sistant Secretary  or  of  the  Clerk  of  the  trustees  as  to  such  elec- 
tion, shall  be  forthwith  filed  with  the  depositaries  then  having 
custody  of  this  instrument. 

Except  in  cases  of  resignation  or  removal,  which  may  take 
effect  at  any  time,  any  trustee  hereunder  shall  hold  office  until 
the  election  and  qualification  of  his  successor. 

Additional  Shares. 

20.  In  addition  to  the  shares  at  any  time  issued  hereunder 
the  trustees  may  from  time  to  time,  with  the  consent  of  a  ma- 


Appe;ndix.  451 

jority  in  interest  of  the  shares  then  outstanding,  at  a  meeting 
duly  called  and  held,  in  the  call  for  which  specific  notice  shall 
have  been  given  thereof,  issue  and  dispose  of  additional  shares, 
creating  the  whole  or  any  part  of  said  increased  issue  preferred 
shares,  all  upon  such  terms  and  in  such  manner  and,  if  pre- 
ferred shares,  with  such  preferences,  as  the  shareholders  at 
such  meeting  may  determine. 

Amendment,  Alteration  or  Termination  oe  Trust. 

21.  The  shareholders  may  upon  the  vote  of  a  majority  in 
interest  of  the  shares  outstanding  at  any  annual  meeting,  or  at 
any  special  meeting  called  for  the  purpose,  alter  or  amend  this 
Agreement  in  any  particular  (except  with  respect  to  the  lia- 
bility of  shareholders  set  forth  in  the  last  paragraph  of  section 
4  and  except  by  extending  the  term  of  this  Agreement)  includ- 
ing, but  without  restricting  the  generality  of  the  foregoing,  any 
change  in  the  number  of  trustees,  or  may  terminate  this  trust. 
Any  such  amendment  shall  be  deemed  thereafter  a  part  of  this 
agreement,  and  a  copy  thereof  certified  by  the  President 
and  Secretary  of  the  Company  shall  forthwith  be  filed 
with  the  depositaries  then  having  custod}''  of  this  instrument. 
Trustees  to  Wind  Up  Upon  Termination  or  to  Transfer 

AS  Directed  by  Shareholders. 

In  case  of  any  such  vote  of  termination,  the  shareholders  may 
also  by  like  majority  in  interest  of  the  shares  outstanding  vote 
to  transfer  the  property,  assets  and  business  of  this  trust  to  an- 
other trust  or  trusts,  or  to  a  corporation  or  corporations,  or 
in  such  other  manner  as  they  shall  deem  wise,  all  upon  such 
terms  as  they  may  by  such  vote  determine ;  and  the  trustees 
shall  carry  out  such  transfer  in  accordance  with  such  vote  and 


452  Trusts  for  Business  Purposes. 

so  doing  shall  be  without  liability.  In  case  of  such  vote  of 
termination,  in  the  absence  of  any  vote  of  the  shareholders  to 
transfer  said  assets  and  business  to  any  other  trust  or  cor- 
poration, or  otherwise,  or  in  case  of  the  expiration  of  this  trust 
by  limitation,  the  trustees  shall  forthwith  proceed  to  wind  up 
this  trust  and  its  affairs  and  business,  and  after  paying  or  satis- 
fying all  obligations  and  liabilities  of  the  Company  shall  divide 
the  property  then  remaining  in  their  hands  or  its  net  proceeds 
ratably  among  the  shareholders.  In  such  winding  up  and  for 
purpose  of  making  distribution  the  trustees  may  in  their  dis- 
cretion from  time  to  time  sell  the  whole  or  any  part  of  the 
trust  property  in  such  parcels  as  they  may  determine,  at  public 
auction  or  private  sale,  and  upon  such  terms  as  they  deem 
wise.  The  powers  of  the  trustees  shall  in  any  of  the  foregoing 
cases  of  termination  continue  after  such  termination  to  the  ex- 
tent and  for  such  time  as  may  be  reasonably  necessary  to  carr}' 
out  any  transfer  directed  by  the  shareholders  as  aforesaid,  or 
to  wind  up  this  trust  as  aforesaid,  but  not  exceeding  the  time 
permitted  by  law. 

22.  This  instrument  is  executed  in  the  State  of  Maine  and 
with  reference  to  the  laws  of  said  State;  and  it  is  the  intent  of 
all  parties  hereto  that  the  construction  and  effect  of  this  instru- 
ment and  every  part  thereof  shall  be  governed  by,  subject  to 
and  construed  according  to  the  laws  of  said  State. 

23.  The  trustees  shall  have  power  at  any  time  to  change  the 
depositaries  of  this  instrument.  * 

In  Witness  Whereof  the  said  trustees  above-named  have 
hereunto  set  their  hands  and  seals  the  day  and  year  first  above 
v/ritten. 

JAMES  LONGLEY  [seal] 

CHARLES  P.  BOWDITCH  [seal] 

FRANCIS  C.  WELCH  [seal] 


Appendix.  453 

GEORGE  WIGGLESWORTH  [seal] 

PHILIP  DEXTER  [seal] 

PHILIP  Y.  DE  NORMANDIE  [seal] 

WILLIAM  AMORY  [seal] 

Commonwealth  oe  Massachusetts 

Suffolk,  ss:  Boston,  ]\Iarch  16,  1915. 

Then  personally  appeared  the  above-named  James  Longley, 
Charles  P.  Bowditch,  Francis  C.  Welch,  George  Wigglesworth, 
Philip  Dexter,  Philip  Y.  De  Normandie,  and  severally  acknowl- 
edged the  foregoing  instrument  by  them  executed  to  be  their 
free  act  and  deed,  before  me. 

JAMES  P.  ROBERTS, 
[Notarial  Seal]  Notary  Public. 

State  of  Maine 

York,  ss:  Biddeford,  Mar.  19,  1915. 

Then  personally  appeared  the  above-named  William  Amory 
and  acknowledged  the  foregoing  instrument  by  him  executed  to 
be  his  free  act  and  deed,  before  me. 

THOMAS  B.  WALKER, 
[Notarial  Seal]  Notary  Public. 


454  Trusts  for  Business  Purposes. 

THE  MARTIN-COPELAND  COMPANY. 

This  company  was  held  to  be  a  trust  and  not  a  partnership 
by  the  Supreme  Court  of  Rhode  Island,  July  6,  1916.  Re- 
ported in  39  R.  I.  193,  98  Atl.  273.  The  Trust  Agreement 
is  as  follows:        i 

"An  agreement  and  declaration  of  trust  made  the  eighth 
(8th)  day  of  August,  A.  D.  1912,  by  and  between  Edgar 
W.  Martin,  of  Barrington,  in  the  county  of  Bristol,  and  Wil- 
liam A.  Copeland  and  Lawrence  C.  Martin,  both  of  Provi- 
dence, in  the  county  of  Providence,  all  in  the  state  of  Rhode 
Island,  and  George  W.  Bleecker,  of  Chicago,  in  the  county 
of  Cook,  and  state  of  Illinois,  trustees  of  the  Martin-Cope- 
land  Company,  for  the  purpose  of  enabling  the  holders  of 
trust  shares  hereunder  to  distribute  the  advantages  and  risks 
of  their  investments  over  different  securities  and  business 
enterprises  in  a  way  ordinarily  possible  to  investors,  and  to 
that  end  to  hold  as  a  com.mon  or  joint  investment  for  the 
common  and  equal  benefit  of  the  shareholders,  ratably,  ac- 
cording to  their  several  holdings  of  shares,  the  personal  prop- 
erty, transferred  or  conveyed  to,  vested  in,  or  acquired  by 
the  trustees  under  this  agreement,  and  to  invest  and  reinvest 
such  money  and  funds  as  may  be  paid  to  the  trustees  or  be 
realized  by  them  from  the  disposition  of  shares  issued  here- 
under, in  such  manner  and  in  such  business  enterprises,  securi- 
ties, and  personal  property  as  under  the  terms  of  this  instru- 
ment shall  be  permissible,  and  in  the  judgment  of  the  trustees 
exercised  under  the  powers  given  them  by  this  instrument 
shall  tend  to  enhance  the  value  of  the  shares  issued  hereunder 
as  investments ;  and  the  said  trustees  hereby  declare  that  they 
will  hold  all  property  acquired  by  them  at  any  time  as  trustees 
hereunder,  with  the  proceeds  thereof,  in  trust,  to  manage  and 


Appendix.  455 

dispose  of  the  same,  and  to  collect,  receive,  and  distribute 
the  income  and  profits  .thereof,  for  the  benefit  of  the  holders 
from  time  to  time  of  the  certificates  of  shares  or  evidences 
of  interest  issued  and  outstanding  hereunder,  in  the  manner 
and  subject  to  the  provisions  of  this  agreement. 
"Title  and  Location  of  Trust. 

"(i)  The  trustees  of  these  presents  may  be  collectively 
designated  as  'Martin-Copeland  Company,'  and  the  title  of 
trustee  or  trustees  hereunder  shall  be  'Trustee  of  the  Martin- 
Copeland  Company,'  or  'Trustees  of  the  Martin-Copeland 
Company,'  as  the  case  may  be,  and  their  principal  place  of 
business  shall  be  at  Providence  aforesaid. 

"(2)  The  trustees  under  this  agreement  are  the  said  Ed- 
gar W.  Aiartin,  William  A.  Copeland,  Lawrence  C.  Martin, 
and  George  W.  Bleecker;  but  the  term  'the  trustees,'  when- 
ever hereinafter  used,  shall  mean  the  trustee  or  trustees  here- 
under for  the  time  being,  whether  original  or  substituted; 
and  any  property  at  any  time  conveyed,  transferred,  or  as- 
signed to  the  trustee  or  trustees  hereunder,  or  otherwise  ac- 
quired by  them,  shall  be  held  by  them  as  trustees  under  this 
agreement. 

"(3)  The  term  'shareholder,'  used  in  this  agreement,  shall 
mean  holder  of  record  of  the  share  receipt  or  share  certificate 
from  the  trustees  hereunder. 

"Issue  of  Shares. 

"(4)  The  trustees  under  this  agreement  shall  as  such  have 
power  to  issue  preferred  shares  and  common  shares  of  the 
par  value  of  one  hundred  ($100)  dollars  each. 

"The  trustees  may  issue  preferred  shares  in  an  amount 
which  shall  not  exceed  in  aggregate  two  hundred  thousand 
($200,000)  dollars  par  value,  and  sell  the  same  at  public 
or  private  sale,  or  exchange  for  other  shares,  securities,  con- 


456  Trusts  for  Business  Purposes. 

tracts,  services,  or  personal  property  upon  such  terms  and 
for  such  prices  and  considerations  as  they  may  deem  ex- 
pedient. 

"The  trustees  may  issue  common  shares  in  an  amount 
which  shall  not  exceed  in  aggregate  two  hundred  thousand 
($200,000)  Dollars  par  value,  and  sell  the  same  at  public  or 
private  sale  or  exchange  for  other  shares,  securities,  contracts, 
services,  or  personal  property  upon  such  terms  and  for  such 
prices  and  considerations  as  they  may  deem  expedient. 

"Any  trustee  may  acquire,  hold,  and  dispose  of  shares  in 
the  trust  in  his  individual  name  and  on  his  personal  account, 
or  jointly  with  others,  or  as  a  member  of  a  firm,  without 
being  disqualified  to  act  as  trustee,  and  while  so  owning  and 
holding  such  shares  on  his  personal  account  shall  be  entitled 
to  the  same  rights  and  privileges  as  any  other  shareholder. 

"(5)  The  trustees  shall  issue  preferred  and  common  share 
certificates  in  such  form  as  they  shall  deem  best  for  each 
sum  of  one  hundred  ($100)  dollars  or  for  its  equivalent 
paid  to  them  under  this  agreement.  No  share  certificate  shall 
be  issued  for  any  fraction  of  a  share. 

"Transfer  of  Shares. 

"(6)  Every  transfer  of  any  share  (otherwise  than  by 
operation  of  law)  shall  be  in  writing  under  the  hand  of  the 
transferror,  and  upon  delivery  thereof,  with  the  existing  cer- 
tificate for  such  share,  to  the  trustees,  or  their  transfer  agent, 
shall  be  recorded  in  the  trust  books,  and  a  new  certificate 
therefor  shall  be  given  to  the  transferee,  which  new  certificate 
and  the  holder  thereof  shall  thereupon  become  subject  to  this 
agreement.  In  case  of  a  transfer  of  only  a  part  of  the  shares 
mentioned  in  any  certificate,  a  new  certificate  for  the  residue 
thereof  shall  be  given  to  the  transferror.  Until  the  existing 
certificate   shall  be  so   delivered   and  transfer   recorded,   the 


Appendix.  457 

transferror  shall  be  deemed  to  be  the  holder  of  the  share  or 
shares  comprised  therein  for  all  the  purposes  of  the  trust 
thereof,  and  the  trustees  shall  not  be  affected  by  any  notice  of 
the  transfer. 

"In  case  of  the  loss  or  destruction  of  a  share  certificate 
issued  hereunder  as  aforesaid,  another  may  be  issued  in  its 
place  by  the  trustee,  under  such  conditions  as  they  may  deem 
expedient. 

"{7)  Any  person  becoming  entitled  to  any  share  in  con- 
sequence of  the  death,  bankruptcy,  or  insolvency  of  any  share- 
holder, or  in  any  other  way  than  by  a  transfer  in  accordance 
with  the  preceding  paragraph,  shall  be  recorded  in  the  trust 
books  as  the  holder  of  the  said  share,  and  receive  a  new  cer- 
tificate for  the  same,  upon  production  of  the  proper  evidence 
thereof  and  delivery  of  the  existing  certificate  to  the  trustees, 
or  their  transfer  agent,  which  new  certificate  and  the  holder 
thereof  shall  thereupon  become  subject  to  this  agreement. 
Until  such  evidence  shall  be  produced,  and  the  existing  cer- 
tificate shall  be  delivered  to  the  trustees,  they  shall  not  be 
affected  by  any  notice  of  the  change  in  title. 

"Title  of  Shares. 

"(8)  All  shares  shall  give  only  the  rights  in  this  agree- 
ment and  in  certificate  thereof  specifically  set  forth,  and  a 
shareholder,  or  upon  the  death,  bankruptcy,  or  insolvency 
of  any  shareholder,  the  person  or  persons  succeeding  to  his 
interest  as  legal  representatives,  assignees,  or  otherwise,  shall 
have  no  right  to  call  for  any  accounting  or  division  of  prop- 
erty or  profits. 

"General   Powers  and   Duties  of  Trustees. 
"(9)     The  trustees   under  this   agreement   shall   have  the 
sole  legal  title  to  all  property,  in  any  part  of  the  United  States 
of  America,   or  in   any   foreign  country,   at  any   time   held. 


458  Trusts  for  Business  Purposes. 

acquired,  or  received  by  them  as  trustees  under  the  terms  of 
this  agreement,  or  in  which  the  shareholders  under  this  agree- 
ment shall  have  any  beneficial  interest  as  such  shareholders, 
and  they  shall  have  and  exercise  the  exclusive  management 
and  control  of  the  same,  in  any  manner  that  they  shall  deem 
for  the  best  interests  of  the  shareholders,  with  all  the  rights 
and  powers  of  absolute  owners  thereof.  They  may  sell,  ex- 
change, mortgage,  pledge,  or  in  any  other  way  dispose  of  or 
deal  with  the  property  of  the  trust,  or  any  part  thereof,  or  in- 
terest therein,  upon  such  terms  as  they  see  fit,  and  take  in 
payment  or  exchange  therefor  cash,  securities,  property,  or 
notes,  and  obligations  of  any  kind  or  description ;  may  adopt 
and  use  a  common  seal ;  may  manufacture,  buy,  sell,  and 
otherwise  deal  in  precious  stones,  chains,  jewelry,  lenses, 
optical  goods  and  kindred  articles,  machinery,  materials,  and 
articles  of  all  kinds  which  shall  be  capable  of  being  used  for 
such  purposes,  and  may  purchase  or  otherwise  acquire  patents, 
patent  rights  and  privileges,  trade-marks  and  trade-names, 
and  improved  or  secret  processes,  that  are  in  any  way  related 
to  any  of  the  objects  aforesaid,  and  grant  licenses  for  the 
use  of,  or  of  selling  or  otherwise  deahng  in,  any  patent  rights 
and  privileges,  trade-marks  and  trade-names,  and  improved 
or  secret  processes  acquired  by  them,  and  for  these  purposes 
use  any  moneys  and  property  in  their  hands ;  and  generally 
make  all  contracts  and  do  all  things  which  they  may  think 
desirable  in  the  management,  development,  and  maintenance 
of  the  trust  properties,  and  shall  deem  for  the  best  interests 
of  the  shareholders.  They  may  sell,  discount,  or  otherwise 
negotiate  notes,  commercial  paper,  and  obligations  of  all  kinds 
coming  into  their  hands,  and  otherwise,  either  without  security, 
or  secured  by  the  pledge  or  mortgage  with  power  of  sale  of 
the  assets  of  the  trust,  as  they  deem  best,  such  sums  from  time 


Appendix.  459 

to  time  as  they  require,  and  they  shall  have  full  power  to 
execute  all  contracts,  mortgages,  and  agreements  or  instru- 
ments in  writing,  and  to  do  any  other  things  which  they  shall 
think  proper  for  executing  any  of  the  powers  or  trusts  herein 
contained,  subject  only  to  the  provisions  and  purposes  of  this 
agreement,  and  shall  have  full  power  to  perform  and  fulfill 
all  agreements  and  obligations  and  pay  all  liabilities  properly 
assumed  by  them  as  such  trustees. 

"(10)  The  trustees  may  make,  adopt,  amend,  or  repeal 
such  by-laws,  rules,  and  regulations  not  inconsistent  with  the 
terms  of  this  agreement  as  they  may  deem  necessary  or  de- 
sirable for  the  conduct  of  their  business,  and  for  the  govern- 
ment of  themselves  and  their  agents,  servants,  and  represen- 
tatives. 

"(11)  The  trustees  shall  have  power  to  represent  the 
shareholders  in  all  suits  or  legal  procedings  in  any  court  of 
law  or  equity,  or  before  any  other  body  or  tribunal,  to  em- 
ploy counsel  and  commence  suits  or  proceedings  or  defend 
the  same,  and  to  compromise  or  submit  to  arbitration  all  mat- 
ters of  dispute  in  which  the  trust  or  trustees  may  be  a  party, 
whenever  and  in  such  manner  as  they  in  their  judgment  may 
deem  proper. 

"(12)  The  trustees  shall  have  power  to  invest  and  rein- 
vest all  funds  and  moneys  of  the  trust  in  their  hands,  in 
merchandise,  in  stocks  and  bonds,  any  other  securities  and 
personal  property,  and  at  any  time  to  sell,  transfer,  and  dis- 
pose of,  without  further  authority  or  consent  than  herein 
contained,  any  property  acquired  by  them,  at  their  discretion, 
and  upon  such  terms  and  for  such  prices  and  considerations 
as  they  deem  wise,  and  reinvest  the  proceeds  of  such  sales, 
upon  such  terms  and  conditions  as  they  may  deem  expedient. 

"(13)     The  trustees  shall  have  power  to  pay  the  expenses 


460  Trusts  for  Business  Purposes. 

of  organization  of  this  trust,  including  all  legal  expenses  in 
connection  with  the  preparation  and  carrying  out  of  plan  for 
the  formation  of  the  trust  and  the  acquisition  of  property 
acquired  hereunder;  to  indemnify  themselves  or  any  of  them 
out  of  the  property  of  the  trust  for  all  liabilities  for  which 
they  or  any  of  them  may  be  personally  liable  in  the  carrying 
out  of  the  trusts  herein  contained;  to  pay  the  necessary  and 
proper  expenses  of  the  carrying  on  of  the  business  of  and 
management  of  the  trust  hereunder,  and  to  employ  such  of- 
ficers, experts,  counsel,  managers,  salesmen,  agents,  mechan- 
ics, workmen,  clerks,  bookkepers,  accountants,  or  other  per- 
sons as  they  think  best,  and  fix  their  compensation  and 
define  their  duties,  and  any  trustee  so  employed  may  receive 
compensation  therefor. 

"(14)  The  trustees  shall  have  power  to  determine  whether 
moneys  or  things  shall,  for  the  purpose  of  these  presents,  be 
considered  as  capital  or  income,  and  what  constitutes  gross 
income  and  what  net  income  in  any  year,  or  part  of  a  year, 
and  to  determine  the  mode  in  which  any  expenses  or  outgoings 
shall  be  borne  as  between  capital  and  income. 
"Number,  Absence,  and  Incapacity  of  Trustees,  and  Vacancies. 

"(15)  The  trustees  shall  not  be  more  than  four  in  num- 
ber. The  trustees  may  designate  one  of  their  number  to  act 
as  president  and  one  to  act  as  treasurer,  and  may  change  such 
designations,  which  officers  shall  have  the  authority  and  shall 
perform  the  duties  usually  incident  to  these  offices  in  case 
of  corporations  so  far  as  practicable,  shall  have  authority  to 
sign  share  certificates  issued  hereunder,  and  shall  have  such 
other  authority  and  perform  such  other  duties  as  may  from 
time  to  time  be  determined  by  the  trustees. 

"A  majority  of  the  trustees  constitutes  a  quorum,  and  the 
concurrence  of  all  the  trustees  shall  not  be  necessary  to  the 


Appendix,  461 

validity  of  any  action  done  by  them,  but  the  wish  of  a  ma- 
jority of  the  trustees  present  and  voting  at  any  meeting  shall 
be  conclusive. 

"Any  vacancy  in  the  number  of  trustees,  caused  otherwise 
than  by  the  removal  of  any  trustee  or  trustees  by  the  com- 
mon shareholders,  may  be  filled  by  the  remaining  trustee  or 
trustees,  by  an  instrument  in  writing,  and  in  case  of  the  re- 
moval of  a  trustee  by  the  common  shareholders,  as  provided 
in  the  following  paragraph  of  this  agreement,  the  vacancy 
shall  be  filled  only  by  the  common  shareholders. 

"(16)  The  common  shareholders  may,  by  vote  of  the  ma- 
jority of  shares  then  outstanding,  at  a  meeting  duly  called  for 
that  purpose,  as  provided  in  paragraph  21  hereof,  remove  any 
trustee  and  appoint  a  new  trustee  in  his  stead. 

"(17)  The  trustee  or  trustees  for  the  time  being  shall  have 
all  the  powers  of  the  original  trustees. 

"(18)  In  case  of  any  vacancy  in  the  office  of  trustees,  or 
the  incapacity  or  neglect  or  refusal  to  execute  the  duties  re- 
posed in  him  of  any  trustee  for  any  reason,  or  the  absence 
from  this  country  of  any  trustee  for  a  period  of  thirty  (30) 
days  or  more,  the  remaining  or  other  trustee  or  trustees  shall 
have  and  exercise  the  powers  and  be  subject  and  holden  to 
perform  all  the  duties  of  all  the  trustees  so  long  as  such  va- 
cancy or  absence  continues,  or  such  incapacity,  neglect,  or  re- 
fusal exists,  and  the  certificate  of  any  remaining  trustee  shall 
be  conclusive  evidence  of  such  vacancy,  absence,  neglect,  in- 
capacity, or  refusal. 

"(19)  Upon  the  resignation,  decease,  removal,  or  perma- 
nent incapacity  of  any  trustee  or  trustees  hereunder,  or 
vacancy  for  any  cause  in  the  office  of  trustee,  the  title  of  such 
trustee  or  trustees  shall  vest  in  the  other  or  remaining  trus- 
tee or  trustees  without  any  conveyance  whatsoever;  and  upon 


462  Trusts  e^or  Business  Purposes. 

the  filling  of  any  vacancy,  or  the  appointment  of  any  new 
or  additional  trustee  or  trustees  hereunder  by  the  common 
shareholders,  or  otherwise,  as  is  hereinbefore  provided,  the 
title  of  the  trust  property  shall  at  once  vest  in  the  then  trustees 
for  the  time  being  without  any  conveyance  whatsoever. 

"(20)     The  trustees  may  by  vote  or  otherwise  delegate  to 
any  one  or  more  of  the  trustees  any  of  their  powers  herein, 
and  any  trustee  may  by  written  power  of  attorney  delegate 
his  power  to  any  other  trustee  or  trustees  herein. 
"Meetings  of  Shareholders. 

"(21)  The  trustees  may  call  meetings  of  common  share- 
holders at  any  time,  and  shall  do  so  upon  the  written  request, 
stating  the  purpose  for  which  such  meeting  shall  be  called, 
of  holders  of  twenty-five  per  cent  of  all  the  common  shares 
outstanding,  and  in  case  of  the  incapacity,  neglect,  or  refusal 
of  the  trustees  to  call  such  meeting  within  a  reasonable  time 
after  the  receipt  of  such  request  therefor,  the  meeting  may 
be  called  by  the  common  shareholders  signing  said  request, 
who  may  do  all  things  necessary  therefor  required  in  the  fol- 
lowing paragraph,  or  otherwise. 

"(22)  A  written  or  printed  notice  of  every  meeting  of 
common  shareholders,  stating  the  time  and  place  of  the  meet- 
ing, and  the  purposes  thereof,  shall  be  given  to  each  common 
shareholder  by  the  trustees  at  least  seven  (7)  days  before 
a  meeting,  by  leaving  such  notice  with  him  or  by  mailing  it, 
post  paid,  to  the  address  last  given  by  him  to  the  trustees, 
or,  in  case  he  had  given  no  address  to  the  trustees,  to>  his  last 
known  place  of  business  or  abode. 

"(23)  Notices  of  meetings,  or  calls  for  payments  or  sub- 
scriptions, or  notices  or  calls  for  any  other  purpose,  shall  be 
deemed  binding  upon  each  shareholder,  if  made  as  provided 
in  the  preceding  paragraph. 


Appendix,  463 

"(24)  Common  shareholders  may  vote  by  proxy,  and  for 
the  purpose  of  voting  at  meetings  each  common  share  shall 
be  entitled  to  one  vote. 

"(25)  No  business  shall  be  transacted  at  any  meeting  of 
the  common  shareholders,  unless  notice  of  such  business  has 
been  given  in  the  call  for  the  meeting,  and  no  business,  except 
to  adjourn,  either  generally  or  to  a  time  assigned,  shall  be 
transacted  at  any  meeting  of  the  common  shareholders,  unless 
the  holders  of  forty  (40)  per  cent,  of  all  the  shares  outstand- 
ing are  present  in  person  or  by  proxy. 

"(26)  A  certificate  signed  by  one  or  more  of  the  trustees, 
or  if  the  office  be  vacant,  or  the  trustee  or  trustees  for  the 
time  being  be  unable,  neglect,  or  refuse  to  act,  by  the  holders 
of  twenty-five  per  cent,  of  all  the  common  shares  outstanding, 
shall  be  conclusive  evidence  of  the  regularity  of  any  meeting, 
of  any  vote  passed,  or  other  proceedings  at  such  meeting, 
and  of  all  facts  in  relation  to  such  meeting  stated  in  such  vote 
or  certificate. 

"Compensation. 

"{^'Z'j^  The  trustees  shall  fix  the  compensation,  if  any,  of 
all  officers  and  agents  whom  they  may  appoint,  and  are  like- 
wise authorized  to  pay  to  themselves  such  compensation  for 
their  services  as  trustees  as  they  may  deem  reasonable,  and 
any  trustee  may  be  employed  by  the  trustees  to  perform  any 
special  business,  financial,  or  other  service,  and  shall  in  such 
case  be  entitled  to  receive  such  additional  compensation  as  the 
trustees  may  fix  and  determine. 

"Liability  of   Shareholders  and  Trustees. 

"(28)  Shareholders  hereunder  shall  not  be  liable  for  any 
assessment,  and  the  trustees  shall  have  no  power  to  bind  the 
shareholders  personally. 

"(29)     Every  act  done,  power  exercised,  or  obligation  as- 


464  Trusts  for  Business  Purposes. 

sumed  by  the  trustees,  pursuant  to  the  provisions  of  this 
agreement,  or  in  carrying  out  the  trusts  herein  contained,  shall 
be  held  to  be  done,  exercised,  or  assumed,  as  the  case  may 
be,  by  them  as  trustees,  and  not  as  individuals,  and  every  per- 
son or  corporation  contracting  with  the  trustees,  as  well  as 
every  beneficiary  hereunder,  shall  look  only  to  the  fund  and 
property  of  the  trust  for  payment  under  such  contract,  or  for 
the  payment  of  any  debt,  mortgage,  judgment,  or  decree,  or 
the  payment  of  any  money  that  may  otherwise  become  due 
or  payable  on.  account  of  the  trusts  herein  provided  for,  and 
any  other  obligation  arising  under  this  agreement  in  whole 
or  in  part ;  and  neither  the  trustees  nor  the  shareholders,  pres- 
ent or  future,  shall  be  personally  liable  therefor. 

"(30)  No  bond  or  surety  or  sureties  shall  be  required  of 
any  trustee  acting  hereunder,  and  each  trustee  shall  be  liable 
only  for  his  own  acts,  and  then  only  for  willful  breach  of 
trust. 

"Liability  for  Application  of  Money  Paid  to  Trustees. 

"(31)  No  purchaser,  mortgagee,  lender, -lessee,  or  other 
person  shall  be  bound  to  see  to  the  application  of  any  money 
paid  by  him  to  the  trustees. 

"Dividends. 

"(32)  The  trustee  may  from  time  to  time  declare  and  pay 
to  the  preferred  and  common  shareholders  dividends  out  of 
the  net  earnings  from  time  to  time  received  by  them,  but 
the  amount  of  such  dividends  and  the  payment  of  them  shall 
be  wholly  in  the  discretion  of  the  trustees,  except  that  any 
dividend  which  may  be  declared  on  the  preferred  shares  shall 
be  at  the  rate  of  six  per  cent,  per  annum  and  no  more,  and 
the  same  shall  be  paid  and  set  apart  before  any  dividend  shall 
be  paid  or  set  apart  for  the  common  shares. 


% 


Appendix.  4^5 

"Reserve  or  Surplus  Fund. 

"(33)  The  trustees  shall  have  authority  to  reserve  in  each 
year  such  sum  as  they  deem  wise  from  the  gross  or  net  in- 
come actually  collected,  as  a  reserve  or  surplus  fund,  with 
power  to  use  said  fund  by  the  trustees  at  any  time  for  the 
maintenance  of  dividends,  for  the  payment  of  the  charges 
of  the  trustees,  or  to  treat  the  same  or  any  part  thereof  as 
surplus  capital,  and  to  change  their  determination  as  to  said 
fund,  or  any  part  thereof,  from  time  to  time,  as  to  them  may 
seem  prudent  and  expedient,  absolutely  at  their  own  discre- 
tion, but  always  subject  to  the  terms  of  this  agreement. 

"Inspection  of   Books. 

"(34)     The  transfer  books  of  the  trust  shall  be  open  to 
the  inspection  of  shareholders  at  all  reasonable  times. 
"Amendment  of  Agreement. 

"(35)  This  agreement  and  declaration  may  be  amended 
or  altered,  except  as  regards  the  liability  of  the  trustees  and 
shareholders  and  the  provisions  relating  to  the  preferred 
shares,  with  the  consent  of  the  trustees  for  the  time  being, 
provided  any  such  proposed  amendment  or  alteration  shall 
be  authorized  and  approved  at  a  meeting  of  the  common 
shareholders  by  at  least  two-thirds  of  all  the  common  shares 
outstanding,  and  notice  of  the  proposed  amendment  or  altera- 
tion shall  have  been  given  in  the  call  for  the  meeting,  but  no 
alteration  or  amendment  shall  affect  any  person  not  having 
notice  thereof,  nor  shall  any  alteration  or  amendment,  or 
other  action,  affect  previously  acquired  rights  of  any  third  per- 
son other  than  shareholders  hereunder. 

"Acknowledgment   of    Certificates. 
"(36)     Any  certificate  or  paper  signed  by  the  trustees,  or 
any  of  them,  or  by  the  common  shareholders  hereunder,  or  a 
copy  of  the  record  of  any  of  the  proceedings  of  the  trustees 


466  Trusts  for  Business  Purposes. 

or  shareholders,  which  it  may  be  deemed  advisable  to  record 
in  any  registry  of  deeds,  or  elsewhere,  may  be  acknowledged 
by  any  one  of  the  parties  signing  in  the  manner  at  the  time  pre- 
scribed by  law  for  the  acknowledgment  of  deeds  to  be  re- 
corded in  such  registry. 

"Termination  of  Trust. 

"(37)  The  trusts  under  this  agreement  may  be  terminated 
at  any  time  by  vote  of  two-thirds  of  the  common  shareholders 
hereunder  at  a  meeting  duly  called  for  that  purpose,  as  here- 
inbefore provided  in  paragraphs  21  and  26  of  this  agreement, 

"(38)  Unless  the  trust  under  this  agreement  shall  be 
sooner  terminated,  as  hereinbefore  provided,  they  shall  con- 
tinue for  twenty-one  (21)  years  after  the  death  of  the  last 
surviving  original  trustee  hereto,  and  of  Wesley  C.  Martin 
and  E.  Cornell  Martin,  sons  of  the  aforesaid  Edgar  W.  Mar- 
tin trustee  hereof,  and  at  the  expiration  of  the  time  so  lim- 
ited for  such  continuance  of  the  said  trusts  they  shall  ter- 
minate. 

"(39)  Upon  the  termination  of  the  trusts  under  this 
agreement  by  the  expiration  of  time,  or  for  any  other  cause, 
the  trustee  shall  sell  the  trust  property  at  either  public  or  pri- 
vate sale  and  liquidate  its  assets;  the  proceeds  of  the  liquida- 
tion shall  be  first  applied  to  the  payment  of  the  holders  of 
preferred  shares  of  the  sum  of  one  hundred  dollars  per  share 
and  any  accrued  and  unpaid  dividends  thereon,  and  the  bal- 
ance remaining  thereafter  shall  be  divided  among  the  holders 
of  common  shares  in  proportion  to  their  holdings. 

"Acceptance  of  Trustees. 
"(40)     Edgar  W.  Martin,  William  A.  Copeland,  Lawrence 
C.  Martin,  and  George  W.  Bleecker  aforesaid,  herein  named 
as  trustees,  hereby  signify  their  acceptance  of  the  trusts  herein 
set  forth. 


Appe;ndix.  467 

"In  witness  whereof  the  said  trustees  have  hereunto  set 
their  hands  and  seals  on  the  day  and  year  first  above  writ- 
ten. 

"Witnesses : 

"Edgar  W.   Martin.  (Seal.) 

"Russell  W.  Wright. 

"WiUiam  A.  Copeland.         (Seal.) 
"Russell  W.  Wright. 

"Lawrence  C.   Martin. 
"Russell  W.  Wright. 

"George  W.  Bleecker." 


468  Trusts  for  Business  Purpose;s. 

TRUST  OF  MATHILDE  PIETSCH,  FOR  HER  BENEFIT. 

The  court  said,  in  the  case  of  Pietsch  v.  Marshall  &  Ilsley 
Bank,  Wisconsin— 160  N.  W.  184:  A  trust  instrument 
whereby  the  trustor  gave  her  realty  and  personalty  to 
trustees  to  manage  for  her  benefit  during  her  life,  and 
then  to  distribute  in  accordance  with  the  instrument,  was 
not  a  testamentary  disposition  of  her  property;  the 
effective  parts  of  the  instrument  clearly  and  expressly  con- 
stituting a  valid  trust,  and  all  other  phraseology  being 
readily  harmonized  with  that  intent  and  object.  Follow- 
ing is  a  copy  of  the  trust  instrument: 

"Whereas,  Mathilde  Pietsch,  of  sound  mind  and  menior}^,  is 
aged  and  is  desirous  of  keeping  her  property  intact  until  her 
death,  and  wishes  to  be  reheved  from  the  cares  and  responsi- 
bilities connected  therev^ith,  and  also  is  desirous  of  making  dis- 
posal thereof  upon  her  death,  for  the  purpose  of  carrying  out 
her  intentions,  said  Mathilde  Pietsch  hereby  sells,  assigns,  sets 
over,  grants,  and  conveys  to  her  daughter  Doretta  Pietsch,  and 
to  her  son  Ferdinand  Pietsch,  and  to  the  survivor  of  them  all 
her  property,  real  and  personal,  in  trust  nevertheless  upon  the 
express  trusts  following,  and  hereby  revoking  all  former  dis- 
posals of  a  testamentary  character,  or  otherwise;  and  the  said 
Doretta  Pietsch  and  Ferdinand  Pietsch  hereby  accept  such 
property  upon  the  trusts  as  herein  expressed : 

"(i)  Power  and  authority  is  hereby  given  to  the  trustees 
or  to  the  survivor  of  them  to  gather  in,  collect,  sue  for  all 
rents,  insurance,  mortgages,  interest,  and  other  property  of 
every  kind  and  nature  of  the  said  Mathilde  Pietsch  and  convert 
all  into  money  and  to  invest  and  reinvest  same  in  securities  as 
said  trustees  shall  deem  meet  and  proper. 

"(2)  For  and  during  her  natural  life  said  Mathilde  Pietsch 
is  to  receive  the  use  and  income  of  said  property  the  net  in- 


Appendix.  469 

come  of  which  is  to  be  paid  over  to  said  Mathilde  Pietsch  upon 
her  request  and  at  such  times  as  she  may  desire. 

"(3)  On  the  1st  day  of  January  and  July  of  each  year 
trustees  shall  render  an  accounting  of  their  stewardship  to  said 
Mathilde  Pietsch. 

"(4)  There  is  also  assigned  to  said  trustees  upon  the  trusts 
herein  expressed  life  insurance  policy  No.  73430,  dated  July  22, 
1867,  in  the  Connecticut  Mutual  I.ife  Insurance  Company  of 
Hartford,  Conn.,  for  twenty-two  hundred  dollars  ($2,200.00), 
subject  to  a  note  against  it  held  by  said  company,  and  there  is 
also  assigned  to  said  trustees  all  moneys  which  said  Mathilde 
Pietsch  may  have  in  banks. 

"(5)  Said  Mathilde  Pietsch  has  this  day  also  delivered  in 
escrow,  to  be  held  by  Frederick  M.  Wilmanns  until  her  death, 
and  then  to  be  delivered  to  her  trustees,  a  deed  of  all  her  real 
estate  (description  of  real  estate  omitted),  subject  to  the  law- 
ful incumbrance  thereon,  and  in  which  said  deed  the  trustees 
are  the  grantees,  and  which  said  real  estate  the  trustees,  after 
the  death  of  said  Mathilde  Pietsch,  are  to  sell  and  dispose  of 
at  such  price,  and  upon  such  terms  and  conditions  as  they  may 
deem  just  and  proper,  and  distribute  the  proceeds  according  to 
the  trust  herein  provided  for. 

"(6)  Out  of  the  personal  property  or  the  proceeds  thereof 
coming  to  the  hands  of  said  trustees,  and  all  other  personal 
property  which  said  Mathilde  Pietsch  may  have  an  interest  in 
at  the  time  of  her  death,  said  trustees  are  ordered  and  directed 
to  pay  as  soon  as  may  be  convenient,  after  payment  of  said 
Mathilde  Pietsch's  just  debts  and  funeral  expenses,  as  follows: 

"(7)  All  the  rest,  residue,  and  remainder  of  my  estate  I 
order  and  direct  my  said  trustees,  or  the  survivor  of  them,  to 
distribute  same  in  equal  shares  among  my  six  children,  Doretta 
Pietsch,  Ferdinand  Pietsch,  Mathilde  J\Iayer,  nee  Pietsch,  Lena 


470  Trusts  for  Business  Purposes. 

Plats,  nee  Pietsch,  Albert  Pietsch  and  Hugo  Pietsch,  or  their 
heirs.  For  the  purpose  of  converting  my  property  into  money 
and  to  make  distribution  as  aforesaid,  I  authorize  and  empower 
my  trustees  to  take  whatever  steps  they  may  deem  necessary 
to  accomplish  the  purpose;  it  being  distinctly  understood  that 
no  distribution  is  to  be  made  until  after  my  death.  Should  any 
question  arise  in  the  execution  of  the  trust,  power  and  discre- 
tion is  given  to  my  trustees,  and  to  the  survivor  of  them  to  act 
as  they  think  best,  confident  that  my  trustees  will  act  for  the 
best  interest  of  all  concerned. 

"In  witness  whereof  the  said  jMathilde  Pietsch  has  hereunto 
set  her  hand  and  seal  this  31st  day  of  July,  19 15,  and  the  said 
Doretta  Pietsch  and  Ferdinand  Pietsch  have  also  hereunto  set 
their  hands  and  seals  on  the  same  day,  and  accept  the  trusts  as 
created  and  declared  herein. 

"Mathilde  Pietsch.        (Seal.) 
"Doretta  Pietsch.  (vSeal.) 

"Ferdinand  Pietsch.     (Seal.)" 
The  foregoing  instrument  was  witnessed  and  also  acknowl- 
edged by  Mathilde  Pietsch,   Doretta   Pietsch,  and   Ferdinand 
Pietsch  before  a  notary. 


Appendix.  471 

HARRY  HAULMAN  TRUST  DEED  AND  WILL. 

In  the  case  of  Haulman  v.  Haulman,  164  la.  471;  145  N.  W. 
930,  the  will  and  trust  agreement  were  construed.  Fol- 
lowing is  a  copy  of  both  instruments: 

These  presents  witness  that  I,  Harry  Haulman,  a  resident  of 
Ankeny,  in  the  county  of  Polk  and  state  of  Iowa,  do  by  these 
presents  create  a  trust  of  my  entire  property,  and  do  place  the 
same  therein  subject  to  the  following  conditions  and  limitations, 
to  wit: 

On  the  1st  day  of  November,  A.  D.  1907,  I  will  place  in  the 
hands  of  my  two  sons,  H.  E.  Haulman  and  B.  T.  Haulman,  the 
sum  of  twenty-five  hundred  dollars  ($2,500.00),  whom  I  do 
hereby  create  the  trustees  of  said  fund,  and  also  of  any  and  all 
other  sums  that  may  be  added  to  said  sum  both  before  and  after 
my  decease. 

Said  sum  of  twenty-five  hundred  dollars  ($2,500.00)  is 
hereby  placed  in  trust  with  my  said  sons,  H.  E.  Haulman  and 
B.  T.  Haulman,  for  the  use  and  benefit  of  my  five  children, 
to  wit,  H.  E.  Haulman,  B.  T.  Haulman,  Mrs.  J.  H.  Harris, 
Mrs.  W.  H.  Lewis,  and  Mrs.  A.  W.  Wagner,  each  to  share 
equally  in  the  fund  and  benefits  thereof  as  hereinafter  provided. 

Said  sum  of  $2,500.00  is  to  be  invested  in  such  securities  as 
my  said  trustees  shall  both  agree  upon  and  deem  wise  and  best 
by  them,  and  they  are  to  add  to  said  fund  all  interest  accumu- 
lations and  profits  accruing  from  said  $2,500.00  so  invested,  and 
to  keep  said  fund,  its  accumulations  and  profits,  contintiously 
invested  in  such  ways  as  they  shall  deem  best. 

My  said  trustees  shall  pay  to  me  4  per  cent,  interest  on  said 
original  sum  of  $2,500.00  on  the  ist  day  of  November  in  each 
year  beginning  with  November  i,  A.  D.  1908.  But,  in  case  I 
do  not  need  or  desire  my  said  trustees  to  pay  me  said  interest. 


472  Trusts  for  Business  Purposes. 

then  the  same  shall  be  kept  intact  in  said  trust  fund.  My  said 
trustees  shall  not  be  required  to  pay  interest  on  any  accumula- 
tions or  profits,  but  only  on  the  original  sum.  of  $2,500.00. 

With  the  written  consent  of  all  of  my  said  children  who  may 
be  living  at  any  particular  time,  my  said  trustees  may  loan  any 
portion  of  said  trust  fund  to  any  one  of  my  said  children  on 
such  terms  and  securities  as  to  my  said  trustees  shall  seem  wise 
and  best. 

In  case,  also,  of  real  necessity,  and  upon  the  written  con- 
sent of  all  of  my  said  children  who  may  be  living  at  any  par- 
ticular time,  my  said  trustees  may  permit  any  one  of  my  said 
children  to  draw  from  said  trust  fund  any  amount  which  my 
said  trustees  shall  think  to  be  best,  up  to  the  amount  of  such 
child's  undivided  share  in  said  fund,  but  no  more.  In  case  of 
the  death  of  one  or  more  of  my  said  children,  his  children  or 
living  issue  of  his  body  shall  have  and  receive  his  parent's  share 
of  said  fund,  and  the  benefits  thereof,  the  same  as  my  said  child 
so  deceased  would  have  received  his  share  of  said  fund,  and 
the  benefits  and  profits  thereof. 

In  case  any  of  my  said  children  shall  die  leaving  no  children 
or  living  issue  of  his  body,  then,  and  in  that  event,  the  portion 
of  said  trust  fund  and  its  accumulations  which  would  have  gone 
to  my  said  child  shall  remain  in  said  trust  fund,  and  shall  be 
divided  equally  among  my  said  other  children,  or  their  issue, 
the  same  as  the  balance  of  the  fund  shall  be  handled,  and  not 
otherwise. 

Upon  my  death,  all  of  my  property,  both  real  and  personal, 
and  wherever  situated,  shall  pass  into  the  hands  of  my  said 
trustees  to  be  handled  by  them  as  said  $2,500.00,  and  the  whole 
of  said  property  shall  be  kept  intact  by  my  said  trustees  in  such 
form  and  condition  as  to  them  shall  seem  best  for  the  full 
period  of  five  years  from  the  date  of  my  decease,  when,  at  that 


Appendix.  473 

time,  my  said  trustees  shall  make  an  equal  distribution  of  said 
trust  property,  and  of  all  of  my  property  then  remaining,  to 
my  said  five  children,  or  the  living  issue  of  their  body,  share 
and  share  alike.  That  is,  each  child  shall  receive  a  portion  equal 
in  all  respects  to  tliat  of  any  other  of  my  said  children.  And 
•  if  any  of  my  said  children  be  then  dead,  and  have  issue  of  their 
body  then  living,  such  issue  shall  receive  the  portion  of  said 
trust  fund  and  property  which  would  have  gone  to  their  parent 
had  he  or  she  been  living. 

In  the  case  of  the  death  of  either  or  both  of  my  said  trus- 
tees, the  remaining  children  of  mine  herein  mentioned  shall 
choose  a  successor  to  such  deceased  trustee  who  shall  carry  on 
and  perform  the  trust  herein  created.  It  being  my  desire  and 
intent  that  no  person  outside  of  my  own  children  as  herein  men- 
tioned shall  ever  be  a  trustee  of  this  trust.  It  being  my  desire, 
also,  and  intention  that  there  shall  at  all  times  be  two  trustees 
of  my  said  property. 

Should  I,  at  any  time,  add  to  this  trust  amount  in  my  life- 
time, my  said  trustees  shall  receive  such  amounts,  and  handle 
and  care  for  such  amounts,  the  same  as  is  herein  mentioned 
concerning  said  $2,500.00  and  its  accumulations  and  other 
property. 

It  is  my  desire,  and  a  condition  that  I  require  of  my  said 
trustees,  that  they  keep  a  strict  account  of  said  trust  fund,  and 
of  all  additions  thereto,  and  of  all  accumulations  thereof,  and 
that  each  year,  in  the  month  of  November,  they  render  a  writ- 
ten statement  to  me,  and  to  each  of  my  said  children,  showing 
the  actual  condition  of  said  fund,  the  amount  thereof,  and  how 
invested,  and  the  securities  held  by  them.  It  is  also  my  desire 
and  intention  that  my  said  trustees  shall  serve  without  com- 
pensation other  than  that  arising  to  all  of  my  children  equally. 

Witness  my  hand  this  5th  day  of  December,  A.  D.  1907. 


474  Trusts  for  Business  Purposes. 

At  the  same  time  that  this  instrument  above  set  out  was  ex- 
ecuted, the  said  Harry  Haulman  made  his  will,  as  follows : 

I,  Harry  Haulman,  being  of  lav/ful  age  and  of  sound  mind 
and  disposing  memory  do  hereby  make,  publish  and  declare  this 
to  be  my  last  will  and  testament,  to  wit :  I  do  hereby  will,  be- 
queath and  devise  unto  my  five  children,  H.  E.  Haulman,  B.  T. 
Haulman,  Mrs.  J.  H.  Harris,  Mrs.  W.  H.  Lewis,  and  Mrs.  A. 
W.  Wagner,  all  of  my  property  both  real  and  personal  that  I 
now  have,  or  may  hereafter  accumulate  or  acquire,  share  and 
share  alike. 

I  do  hereby  nominate  and  appoint  my  two  sons,  H.  E.  Haul- 
man  and  B.  T.  Haulman  executors  of  this  my  last  will  and 
testament  and  request  and  direct  that  they  keep  and  care  for 
my  property  the  same  as  I  have  this  day  directed  them  to  do  in 
an  article  of  trust  and  that  they  follow  out  the  provisions  of 
said  trust  fully,  and,  at  the  end  of  five  years  from  my  decease 
that  they  make  an  equal  distribution  of  my  property  to  my  said 
children.  If  any  of  my  said  children  die  without  issue  and  in 
that  event,  his  share  shall  be  equally  divided  among  the  remain- 
ing children,  except  that  if  any  of  my  children  are  deceased  and 
have  living  issue,  then  and  in  that  event,  they  shall  receive  the 
share  which  their  parent  would  have  received  if  living. 

I  do  hereby  request  that  said  trust  be  fully  executed  and  that 
said  trust  instrument  and  this  will  be  construed  together  and 
that  my  said  property  be  handled  and  disposed  of  as  in  said  trust 
instrument  and  in  this  will  provided.  Witness  my  hand  this 
5th  day  of  December,  A.  D.  1907. 


App]<;ndix.  475 

JOHN   PLANKINTON;    DECLARATION   OF   TRUST   IN 

FORM  OF  WILL. 

The  trustees  were  undecided  as  to  what  action  should  be 
taken  in  reference  to  certain  clauses  in  the  instrument. 
They  went  to  the  court  for  instruction.  This  case  is  re- 
ported in  152  Wis.  275;  140  N.  W.  5,  as  Upham  v.  Planli- 
inton.     Copy  of  the  Trust  Instrument  is  as  follows: 

I,  John  Plankinton,  of  the  City  of  Milwaukee,  in  the  State 
of  Wisconsin,  do  make,  publish  and  declare  this  my  last  will 
and  testament  and  I  do  hereby  revoke  and  annul  any  and  all 
other  wills  by  me  at  any  time  heretofore  made. 

I  do  hereby  nominate  and  appoint  my  wife,  Annie  B. 
Plankinton  and  my  son,  William  Plankinton,  to  be  the  execu- 
trix and  executor  of  this  my  will,  and  in  case  of  the  death 
of  either  before  my  death,  I  wish  the  survivor  to  be  such 
executrix  or  executor,  and  I  wish  that  no  bond  or  security 
of  any  kind  be  required  of  either  of  them  for  the  faithful 
discharge  of  any  duty  as  such  executrix  or  executor  or  for 
the  performance  of  any  trust  whatever  under  this  will,  mean- 
ing hereby  to  direct  that  such  bond  and  security  be  waived. 

I  direct  that  my  just  debts,  if  any  there  shall  be,  and 
necessary  and  proper  funeral  expenses  and  charges  and  ex- 
penses of  administration  be  paid  out  of  my  estate. 

I  give  and  bequeath  to  my  niece,  Julia  Hickey,  of  Sharps- 
burg,  in  the  State  of  Pennsylvania,  the  sum  of  five  thousand 
dollars  ($5,000). 

I  give  and  bequeath  to  my  sister,  Ann  J.  Denham,  the 
mother  of  said  Julia  Hickey,  the  sum  of  twenty  five  thousand 
dollars  ($25000)  and  in  case  of  the  death  of  my  said  sister 
before  my  death  I  direct  that  the  said  sum  of  twenty  five 
thousand  dollars  be  paid  to  my  said  niece,  Julia  Hickey,  in 
addition  to  the  above  mentioned  sum  of  five  thousand  dollars, 


4/6  Trusts  for  Business  Purpose;s. 

making  her  bequest  thirty  thousand  dollars  which  I   hereby 
give. 

I  hereby  give,  devise  and  bequeath  to  my  wife,  Annie  B, 
Plankinton,  to  have,  hold  and  enjoy  for  and  during  her  life, 
my  homestead  being  a  part  of  block  two  hundred  and  fifty 
five  (255)  in  Roger's  Subdivision,  now  in  the  i6th  Ward  of 
the  City  of  Milwaukee,  bounded  on  the  north  by  Grand  Avenue, 
on  the  east  by  Fifteenth  Street,  on  the  south  by  a  line  twenty 
feet  south  of  the  barn  now  on  the  premises  parallel  with  the 
north  line  of  the  block,  and  west  by  the  east  boundary  of  the 
land  of  my  son,  William  Plankinton,  and  by  said  line  pro- 
duced south  to  the  south  boundary  aforesaid,  including  the 
dwelling  house,  barn  and  all  other  buildings  and  improvements 
upon  the  premises,  and  also  all  animals,  articles  and  prop- 
erty of  any  kind,  owned  by  me  at  the  time  of  my  death 
provided  for  use,  or  convenience  or  ornament,  in  or  about 
our  home,  whether  in  the  dwelling  house  or  in  the  barn  or 
any  building  on  the  premises  or  in  the  grounds  outside  of 
any  building,  to  the  end  that  at  my  death  my  wife  shall  take, 
have,  hold  and  enjoy  during  her  life  our  home  with  its  ap- 
pointments and  surroundings  as  the  same  shall  be  at  the  time 
of  my  death,  and  while  I  make  this  devise  and  bequest  to 
my  wife  for  her  life  subject  to  no  charge  or  condition  what- 
ever, I  know  that  it  will  be  a  pleasure  to  her,  as  it  will  accord 
with  my  wishes,  that  while  she  lives  and  occupies  our  home- 
stead it  shall  continue  to  be  the  home  of  any  of  my  family 
desiring  or  needing  it. 

I  make  the  following  bequests  to  be  paid  in  money  with  no 
unnecessary  delay  after  my  death,  to-wit:  ten  thousand  dol- 
lars ($10,000)  to  the  Society,  corporation  or  association 
which  manages  and  controls  the  hospital  in  the  City  of  Mil- 
waukee known  as  the  Passavant  Hospital,   for  the  use  and 


Appe;ndix.  477 

benefit  of  that  hospital;  five  thousand  dollars  ($5,000)  to 
the  Milwaukee  Orphan  Asylum,  meaning  the  charity  in  the 
City  of  Milwaukee  known  as  the  Protestant  Orphan  Asylum; 
five  thousand  dollars  ($5000)  to  Jeremiah  Quinn  of  the  City 
of  Milwaukee  and  one  thousand  dollars  to  each  of  the  follow- 
ing persons  who  are  in  my  employ  at  and  about  my  residence, 
to-wit :  Charles  Burmeister,  Senior,  Charles  Burmeister, 
Junior,  Adolph  Riemer,  Ellen  Bogne,  Sarah  Bogne,  Kate 
Delany,  Kate  Adamer  and  Elizabeth  Dawson. 

All  the  rest,  residue  and  remainder  of  my  estate  and  of 
property  of  every  kind  and  nature,  which  I  shall  own  or  in 
which  I  shall  have  any  right,  title,  interest  or  claim  at  the 
time  of  my  death,  I  hereby  give,  devise  and  bequeath  unto 
the  above  named  executrix  and  executor  of  this  will,  and  to 
the  survivor  of  them,  in  trust,  for  the  uses  and  purposes  here- 
inafter set  forth  for  a  term  during  the  lives  of  my  daughter, 
Elizabeth  E.  Plankinton  and  my  son,  William  Plankinton, 
and  twenty  one  years  thereafter,  if  they  shall  both  survive 
me,  but  in  case  either  should  not  survive  me,  then  for  a  term 
during  the  life  of  the  one  who  survives  me  and  of  my  wife, 
if  she  survives  me,  but  in  case  my  wife  does  not  survive 
me  and  one  only  of  my  said  children  survives  me,  then  for  a 
term  during  the  life  of  such  surviving  son  or  daughter  and 
in  case  neither  of  my  said  children  survives  me  and  my  wife 
survives  me,  then  for  a  term  during  her  life. 

It  is  my  will  that  during  the  term  of  their  trust,  said  trus- 
tees have  the  entire  control,  management  and  charge  of  the 
estate  and  property  committed  to  them,  both  personal  and 
real,  collecting  receiving  and  handling  all  moneys  for  the  in- 
terest of  the  estate,  continuing  or  changing  any  and  all  in- 
vestments which  may  have  been  made  as  they  shall  deem  best, 
investing    and    reinvesting   or   otherwise    using    any    and    all 


478  Trusts  for  Business  Purposes. 

moneys  that  may  come  into  their  hands  in  such  manner  and 
upon  such  securities  as  they  shall  deem  best,  intending  hereby 
to  give  to  them  full  authority  and  discretion  and  not  holding 
them  to  any  prescribed  rules  governing  the  investment  of 
trust  funds. 

It  is  my  will,  that  during  the  term  of  their  trust,  said  trus- 
tees, out  of  the  income  derived  from  my  estate  in  their  hands 
care  for,  maintain  and  keep  in  good  repair  and  condition  all 
buildings  and  other  property  as  shall  be  for  the  best  interest 
of  the  estate,  and  that  by  repairing  and  replenishing  when 
necessary  they  maintain  and  keep  up  the  furniture  and  all 
articles  and  property  of  any  kind  whatsoever,  in  the  hotel 
building  in  the  city  of  ]\Iilwaukee,  known  as  the  "Plankinton 
House"  which  I  shall  have  provided  for  use  or  convenience 
or  adornment  so  that  so  long  as  the  building  shall  remain 
used  and  kept  as  a  hotel,  it  may  be,  in  all  respects,  first  class. 

It  is  my  will  that  said  trustees  shall  set  apart  each  year 
one  tenth  of  the  whole  net  income  of  my  estate  and  hold  the 
same  and  all  additions  thereto  as  a  fund  to  meet  any  extra- 
ordinary expenditures  or  any  expenditure  for  which  the  in- 
come is  not  sufficient,  which  they  shall  deem  best  for  the 
protection  or  benefit  of  the  estate.  The  moneys  constituting 
such  fund  they  shall  invest  and  keep  invested  as  they  shall  be 
able,  so  that  the  fund  may  be  always  available  for  the  pur- 
pose intended,  such  investments  to  be  made  in  such  manner 
and  on  such  securities  as  the  trustees  shall  deem  best. 

The  trustees  are  hereby  authorized  and  the  survivor  of  them 
is  authorized  to  sell  and  convey  any  and  all  real  estate  hereby 
devised  to  them  which  shall  be  vacant  and  not  occupied  with 
buildings  at  the  time  of  my  death  on  such  terms  and  for 
such  prices  as  they  shall  deem  best  and  to  invest  any  or  all 
moneys  received  from  such  sales,  in  the  purchase  of  improved 


Appendix.  479 

real  estate  or  in  erecting  buildings  on  any  vacant  land  held 
by  them  as  part  of  my  estate,  as  they  shall  deem  best. 

In  case  of  the  damage  or  destruction  by  fire  or  other  cas- 
ualty of  any  building  held  by  the  trustees  for  which  they  shall 
receive  insurance  moneys,  it  is  my  will  that  the  trustees  apply 
such  moneys  or  so  much  as  may  be  needed  to  the  repair  or 
rebuilding  of  such  building  with  full  authority  to  make  any 
changes  or  improvements  in  so  repairing  a  damaged  building 
or  in  building  again  on  the  site  of  a  destroyed  building  as  the 
trustees  shall  deem  advisable  and  if  at  any  time  they  shall 
deem  it  best  they  are  authorized  to  use  the  ten  per  cent  re- 
served fund  for  such  purpose  in  addition  to  insurance  moneys 
received. 

I  hereby  direct  that  said  trustees  pay  to  my  wife,  Annie 
B.  Plankinton  out  of  the  net  income  of  my  estate  held  by 
them,  ten  thousand  dollars  annually  during  her  life  it  being 
my  intention  thereby  that  she  have  means  provided  for  the 
payment  of  taxes,  repairs,  and  other  expenses  upon  the  home- 
stead with  full  authority  to  use  any  excess  at  her  pleasure. 

I  hereby  direct  that  said  trustees  after  paying  or  provid- 
ing for  the  payment  of  all  sums  that  shall  be  required  each 
year  for  taxes,  insurance,  repairs,  and  every  other  purpose 
required  for  maintaining  and  for  the  charge  and  care  of 
my  estate  in  their  hands,  as  herein  intended,  and  after  setting 
apart  the  ten  per  cent  reserved  fund  each  year,  and  after 
paying  or  providing  for  the  payment  of  the  sum  of  ten 
thousand  dollars  yearly  to  my  wife  during  her  life,  shall 
divide  the  remainder  of  the  net  income  equally  between  my 
wife,  my  son  and  my  daughter,  one  third  of  such  net  in- 
come, each  year,  to  each,  during  their  lives  and  these  pay- 
ments I  wish  to  have  made  semi-annually. 

In  case  of  the  death  of  either  of  the  three,  leaving  surviv- 


480  Trusts  for  Business  Purposes. 

ing  no  lawful  issue,  I  direct  that  the  share  of  such  net  in- 
come intended  for  such  deceased  one,  be  thereafter  paid  to 
the  other  two,  so  long  as  they  shall  live  (not  exceeding  the 
term  of  the  estate  of  said  trustees)  one  half  to  each,  and 
upon  the  death  of  either  of  the  two,  so  surviving  the  third, 
leaving  no  lawful  issue,  I  direct  that  the  whole  of  such  net 
income  be  paid  to  such  last  survivor  during  her  or  his  life, 
not  exceeding  the  term  of  the  estate  of  said  trustees. 

In  case  either  dying  shall  leave  issue  surviving,  then  I 
direct  said  trustees  to  continue  the  payment  of  the  share  of 
such  income  hereby  intended  for  such  one  deceased  to  the 
child  or  children  of  such  deceased,  share  and  share  alike, 
if  there  shall  be  more  than  one  child  so  long  as  they  shall 
live  and  so  long  as  the  estate  shall  be  held  by  the  trustees, 
and  in  case  of  the  death  of  any  child  having  lawful  issue 
surviving  then  to  such  issue  during  life,  so  long  as  the  estate 
shall  be  held  by  said  trustees,  the  issue  in  all  cases  taking 
by  right  of  representation  and  not  per  capita. 

It  is  my  will  that  the  trust  herein  created  shall  cease,  and 
the  term  for  which  such  trustees  hold  shall  end  upon  the 
death  of  the  one  who  shall  last  survive  of  my  wife,  my  son 
and  my  daughter,  if  such  death  of  the  last  survivor  shall 
occur  before  the  expiration  of  the  twenty  one  years  herein- 
above stated  for  the  life  of  the  trust. 

All  the  rest,  residue  and  remainder  of  my  estate  and  of 
property  of  any  kind  that  shall  be  and  remain  at  the  ter- 
mination of  the  trust  and  the  end  of  the  term  for  which  it  is 
to  be  held  by  said  trustees,  under  the  preceding  provisions 
of  this  will,  I  hereby  give,  devise  and  bequeath  to  the  surviving 
issue  of  my  son  and  of  my  daughter  if  they  shall  leave  issue 
surviving  one  half  to  the  issue  of  my  son  and  one  half  to  the 
issue  of  my  daughter  such  surviving  issue  taking  in  all  cases 


Appendix.  481 

according  to  the  right  of  representation  and  not  per  capita. 
And  in  case  either  my  son  or  daughter  should  die  leaving 
no  issue  surviving  him  or  her  then  the  entire  rest,  residue 
and  remainder  aforesaid,  I  hereby  give,  devise  and  bequeath 
to  the  issue  surviving  of  either  my  son  or  my  daughter  who 
has  left  issue  surviving  such  issue  in  all  cases  where  it  is 
applicable,  taking  according  to  the  right  of  representation  and 
not  per  capita.  AH  real  estate  devised  by  this  paragraph  of 
my  will  is  to  be  taken  in  fee  and  all  personal  property  abso- 
lutely. 

In  case  there  shall  be  no  lawful  issue  surviving  of  either 
my  son  or  my  daughter  at  the  termination  of  the  trust  herein 
and  at  the  end  of  the  term  for  which  said  trustees  are  to 
hold  my  said  estate  and  property  as  above  provided,  and  in 
case  there  has  been  no  disposition  of  the  property  under  any 
subsequent  clause  of  this  will,  then  upon  such  termination  of 
the  trust,  I  hereby  give,  devise  and  bequeath  all  the  rest,  resi- 
due and  remainder  of  my  estate  and  property  held  by  said 
trustees  unto  the  Passavant  Hospital  hereinbefore  mentioned, 
meaning  thereby  to  the  society,  association  or  corporation  hav- 
ing the  charge  and  control  of  the  Hospital  in  Milwaukee 
known  by  that  name,  for  the  use  and  benefit  of  that  hospital, 
all  real  estate  devised  hereby  to  be  taken  in  fee  and  all  per- 
sonal property  absolutely  with  full  power  to  the  devisee  to 
convert,  dispose  of  or  use  at  pleasure  for  the  benefit  of  the 
hospital. 

The  provisions  contained  in  this  will  for  my  wife  are  in- 
tended to  be  in  lieu  of  her  dower  and  any  other  lawful 
interest  in  my  estate  as  my  widow,  and  if  accepted  are  to  be 
so  taken. 

In  case  my  son  and  daughter  shall  survive  my  wife  and 
my  daughter  shall  reach  the  age  of  fifty  five  years  and  at 


482  Trusts  for  Business  Purposes. 

that  time  there  shall  be  no  issue  living  of  either  my  son  or 
my  daughter,  it  is  my  will  that  the  trust  herein  created  shall 
terminate  and  the  term  for  which  said  trustees  hold  my 
estate  end,  although  before  the  period  herein  first  fixed  for 
the  termination  of  such  trust,  and  in  such  case  I  hereby  give, 
devise  and  bequeath  all  the  rest,  residue  and  remainder  of  my 
estate  and  of  m}^  property  of  any  kind  then  in  the  hands  of 
said  trustees,  in  equal  shares  or  parts  to  my  son  William 
Plankinton  and  my  daughter,  Elizabeth  E.  Plankinton  to  be  by 
them  respectively  held,  the  real  estate  in  fee  and  the  personal 
property  absolutely. 

In  case  of  the  death  of  my  daughter  before  she  reaches 
the  age  of  fifty  five  years,  leaving  no  issue  surviving  her, 
then  upon  the  death  of  my  wife,  if  she  survives  my  daughter, 
and  if  my  wife  does  not  survive  my  daughter  then  upon  the 
death  of  my  daughter,  if  my  son  William  survives  and  has 
no  issue  living  at  that  time,  it  is  my  will  that  the  trust  herein 
created  shall  thereupon  cease  and  the  term  for  which  said 
trustees  hold  shall  then  end,  although  it  be  before  the  end  of 
the  twenty  one  years  hereinabove  named  for  the  termination 
of  the  trust  and  all  the  rest,  residue  and  remainder  of  my  es- 
tate and  property  held  by  the  trustees,  in  such  case,  I  give, 
devise  and  bequeath  to  my  son  William  Plankinton  and  to 
his  heirs  and  assigns  forever. 

In  case  of  the  death  of  my  wife  and  of  my  son  William 
before  my  daughter  reaches  the  age  of  fifty  five  years  then  if 
there  is  no  living  issue  of  either  my  son  or  my  daughter,  it 
is  my  will  that  the  trust  herein  created  shall  thereupon  cease 
and  that  the  term  for  which  said  trustees  hold  shall  then  end 
although  it  be  before  the  end  of  the  twenty  one  years  herein- 
above named  and  provided  for  the  termination  of  such  trust 
and  in  that  case,  all  the  rest,  residue  and  remainder  of  my 


Appe;ndix.  483 

estate  and  property  in  the  hands  of  said  trustees,  I  hereby 
give,  devise  and  bequeath  unto  my  daughter  Ehzabeth  E. 
Plankinton  and  her  heirs  and  assigns  forever. 

In  Testimony  Whereof  I  have  hereunto  set  my  hand  and 
seal  and  pubhshed  and  declared  this  instrument  of  13  written 
pages  to  be  my  last  will  and  testament  in  the  presence  of  the 
witnesses  named  below  this  15th  day  of  February,  A.  D.  1889. 

John  Plankinton         (Seal) 

The  above  instrument  of  13  written  pages  signed,  sealed, 
published  and  declared  by  said  John  Plankinton  as  and  for 
his  last  will  and  testament  in  presence  of  us,  who  in  his  pres- 
ence and  in  the  presence  of  each  other  and  at  his  request  have 
hereto  subscribed  our  names  as  witnesses. 
Jerome  R.   Brigham  Milwaukee,  Wis. 

E.  E.  Murphy  Milwaukee,  Wis. 


484  Trusts  for  Busine:ss  Purposes. 

PENNYROYAL  DEVELOPMENT  COMPANY. 

THIS  AGREEMENT,  made  this  4th  day  of  June.  A.  D. 
1921,  between  William  F.  Ware,  designated  as  the  Subscriber, 
and  Edmond  J.  Ware,  Joseph  K.  Ryan,  Russell  Hogan  and 
George  E.  Garth,  and  William  F.  Ware,  together  with  their 
successors,  herein  designated  as  the  Trustees,  witnesseth : 

THAT  WHEREx\S,  the  Subscriber  and  Lessee  proposes  to 
transfer,  assign  and  deliver  to  the  Trustees,  under  the  designa- 
tion of  the  PENNYROYAL  DEVELOPMENT  COMPANY, 
certain  leases  which  are  more  fully  described  in  Schedule  A 
hereto  attached  and  identified  by  the  signatures  of  the  parties 
hereto,  and  filed  with  the  Trustees;  and  the  Trustees,  for  the 
purpose  of  defining  the  interest  of  the  Subscriber  and  his  as- 
signs in  such  property,  have  agreed  to  issue  to  the  Subscriber, 
negotiable  certificates  representing  Beneficial  Interests,  or 
shares,  in  and  to  the  Trust  Estate  herein  created,  to  the  amount 
of  Twelve  Hundred  and  Fifty  (1250)  Common  Beneficial  In- 
terest or  shares,  each  Interest  to  be  of  the  expressed  par  value 
of  One  Hundred  Dollars  ($100.00),  the  same  being  fully  paid 
and  non-assessable,  and  are  transferable  on  the  books  of  the 
Trustees  in  accordance  with  the  terms  of  this  instrument. 

NOW,. THEREFORE,  the  Trustees,  for  and  in  considera- 
tion of  the  said  leases,  hereby  transferred,  assigned  and  deliv- 
ered to  them  by  the  Subscriber,  described  in  Schedule  A,  have 
agreed  and  do  hereby  agree  to  issue  to  the  Subscriber  Beneficial 
Certificates  to  the  amount  of  Twelve  Hundred  and  Fifty 
(1250)  Common  Beneficial  Interest  or  shares,  and  the  Trustees 
hereby  further  declare  that  they  will  hold  the  remaining  of  the 
Tv/enty-five  Hundred  (2500)  Common  Beneficial  Interest  and 
said  property,  to  be  transferred  to  them  as  well  as  all  other 
property  which  they  may  acquire  as  Trustees,  together  with  the 


Appendix.  485 

proceeds  and  profits  thereof,  in  trust;  to  manage  and  dispose 
of  the  same  for  the  benefit  of  the  holders  from  time  to  time,  of 
certificates  issued  hereunder,  and  in  the  manner  and  subject  to 
the  stipulations  herein  contained,  to  wit: 

FIRST :  That  whenever  the  term  "Trustees"  is  used  herein, 
it  shall  refer  to  and  include  the  above  Trustees,  and  also  any 
successors  in  trust,  appointed  under  the  terms  hereof.  That 
whenever  the  term  "Company"  is  used  herein,  it  shall  be 
deemed  to  refer  to  said  PENNYROYAL  DEVELOPMENT 
COMPANY,  being  the  designation,  so  far  as  practicable,  of  the 
said  Board  of  Trustees  and  their  successors  in  trust,  in  their 
collective  capacity,  under  the  terms  hereof.  That  wherever  the 
term  beneficiary  is  used  herein  it  shall  be  deemed  to  mean  the 
owner  of  a  Beneficial  Interest  in  and  to  the  trust  estate  herein. 
That  whenever  the  term  "Certificate  Holder"  is  used  herein  it 
shall  be  deemed  to  mean  the  owner  of  a  certificate  evidencing 
one  or  more  Beneficial  Interests,  of  the  par  value  of  One  Hun- 
dred Dollars  ($100.00)  each,  in  and  to  the  Trust  Estate  herein 
mentioned  the  legal  title,  ownership  and  control  of  which  estate 
is  vested  in  said  Trustee ;  and  that  whenever  the  term  "Certifi- 
cate is  used  herein,  it  shall  be  deemed  to  mean  an  instrument  in 
writing,  or  printed  or  partly  written  and  printed,  issued  by  said 
Trustees,  evidencing  the  ownership  of  an  equitable  interest  in 
said  estate  of  one  or  more  beneficial  interests,  as  may  therein  be 
stated. 

(B)  The  Trustees,  in  their  collective  capacity,  shall  be 
designated,  so  far  as  practicable,  as  the  PENNYROYAL  DE- 
VELOPMENT COMPANY,  and  under  that  name  shall,  so 
far  as  practicable,  conduct  all  business  and  execute  all  instru- 
ments in  writing,  in  performance  of  their  trust. 

SECOND :  The  Trustees  do  hereby  acknowledge  the  re- 
ceipt by  them  of  the  property  aforementioned,  and  it  is  express- 


486  Trusts  for  Business  Purposes. 

ly  agreed  that  the  said  property,  as  well  as  any  other  which  may 
hereafter  be  acquired  by  the  Trtist'ees  for  the  purpose  herein 
mentioned  under  the  terms  hereof,  shall  be  received  by  the 
Trustees,  and  shall  be  by  them  held,  owned,  controlled,  man- 
aged, and  applied  to  the  uses  and  purposes  herein  mentioned, 
and  to  no  other. 

(B)  That  the  money,  or  property,  together  with  the  income 
and  issues  thereof  received  or  acquired  by  the  said  Trustees 
under  the  terms  hereof,  shall  constitute  and  be  held,  kept  and 
used  by  them  as  a  Trust  Estate  for  the  use  and  benefit  of  the 
Certificate  Holders  in  the  said  estate,  and  that  the  said  Trus- 
tees are  authorized,  empowered  and  directed  to  apply  the  said 
money  or  property  or  the  proceeds,  the  increase  or  income 
thereof,  constituting  said  Trust  Estate,  as  follows,  to  wit: 

(C)  To  buy  and  sell  leases;  to  buy  and  sell  land;  to  de- 
velop and  drill  for  oil  and  gas ;  to  buy  and  sell  oil  and  gas ;  to 
construct,  buy,  sell,  own  and  operate  pipe  lines,  tank  lines,  cars, 
ships,  trucks,  and  any  and  all  other  appliances  for  the  handling 
and  selling  of  oil  and  gas. 

(D)  To  enter  into,  apply  for,  purchase  or  otherwise  acquire 
any  franchises,  contracts  or  concessions  for  or  in  relation  to  the 
construction,  execution,  carrying  out,  equipment,  improvement, 
administration,  management  or  control  of  the  aforementioned 
operations  or  of  works  and  conveniences,  and  to  undertake,  ex- 
ecute, carry  out,  sublet,  dispose  of  or  otherwise  do  any  and  all 
things  necessary  to  put  into  effect  the  purposes  for  which  the 
said  trust  is  organized. 

(E)  To  construct,  manufacture,  buy,  sell,  install,  lease  or 
otherwise  dispose  of  and  deal  in  and  trade  in  works,  machinery, 
appliances,  instruments,  vehicles,  supplies,  materials  and  ar- 
ticles of  every  nature  and  description  used  or  capable  of  being 
used  in  the  production,  refining,  manufacture,  operation,  dis- 


Appendix,  487 

tribution,  control  or  other  appliances  used  in  the  production, 
refining  and  transporting  of  gas  and  oil. 

(F)  To  acquire  the  good  will,  rights  and  other  oil  and  gas 
property,  or  other  properties,  whether  owned  by  individuals, 
corporations,  trusts  or  associations,  or  otherwise,  and  to  under- 
take the  whole  or  any  part  of  the  assets  or  liabilities  of  any 
person,  firm,  association,  corporation  or  trust ;  to  pay  for  the 
same  in  cash,  the  Beneficial  Interests  of  this  Trust  Estate,  bonds 
or  otherwise,  as  the  Trustees  deem  fit;  to  hold  or  in  any  man- 
ner dispose  of  or  conduct  in  any  lawful  manner,  the  whole  or 
any  part  of  the  business  or  property  so  acquired,  and  to  exer- 
cise all  the  powers  necessary  or  convenient  in  and  about  the 
conduct  and  management  of  such  business. 

(G)  To  enter  into,  make  and  perform  contracts  of  every 
kind  with  any  person,  firm,  association  or  corporation,  persons, 
municipality,  body  politic,  county,  State,  government,  colony  or 
dependency  thereof  and  without  limit  as  to  amount,  to  draw, 
make,  accept,  endorse,  discount,  execute  and  issue  promissory 
notes,  drafts,  bills  of  exchange,  warrants,  bonds,  debentures, 
and  other  negotiable  and  transferable  instruments  and  evidences 
of  indebtedness  whether  secured  by  mortgage  or  otherwise,  so 
far  as  may  be  permitted  by  the  laws  of  the  State  of  Kentucky 
or  of  the  United  States. 

(H)  To  do  any  or  all  of  the  things  herein  set  forth  to 
the  same  extent  as  natural  persons  might  or  could  do,  and  in 
any  part  of  the  world,  as  principals,  agents,  contractors,  trus- 
tees, or  otherwise,  and  either  alone  or  in  company  with  others. 

To  have  offices,  conduct  its  business  and  promote  its  objects 
within  and  without  the  State  of  Kentucky,  in  other  States,  the 
District  of  Columbia,  the  territories  and  colonies  of  the  United 
States,  and  in  foreign  countries,  without  restriction  as  to  place 
or  amount. 


488 


Trusts  for  Business  Purposes. 


In  general,  to  carry  on  any  other  business  in  connection  there- 
with, whether  manufacturing,  agricultural,  mining  or  other- 
wise, not  forbidden  by  the  laws  of  the  United  States. 

THIRD :  The  Trustees  hereunder  shall  be  five  in  number, 
but  at  any  annual  meeting,  or  regular  or  special  meeting  of  the 
Trustees,  called  for  that  purpose,  the  Board  of  Trustees  may 
be  increased  to  seven  or  nine  members  by  the  then  Board  of 
Trustees,  and  the  Trust  Estate  shall  rest  in  the  additional  Trus- 
tees, in  connection  with  those  already  in  office,  the  same  as  if 
they  were  original  parties  to  this  instrument ;  and  the  Trustees 
herein  mentioned  shall  hold  their  office  until  the  annual  meet- 
ing-, or  until  their  successors  have  been  elected  and  have  ac- 
cepted  their  trust. 

(B)  The  Trustees,  shall,  at  every  annual  meeting  or  ad- 
journment thereof,  elect  a  full  Board  of  Trustees  to  serve  for 
the  next  ensuing  year,  said  annual  meeting  to  be  on  the  first 
Tuesday  in  June,  following  the  first  ]\Ionday  in  June  each  year, 
commencing  in  1922. 

FOURTH :  The  Trustees  are  authorized  to  employ  all  nec- 
essary or  proper  agents,  sen^ants,  brokers,  attorneys,  employees 
or  counsel,  to  carry  into  effect  the  purpose  of  the  trust  herein 
contained,  and  to  protect  and  preserve  the  same,  and  to  provide 
and  pay  out  of  said  trust  estate  the  compensation,  fees,  commis- 
sions, or  expenses  incurred  in  the  management  thereof,  and  to 
vote  salaries  to  themselves.  To  contract  for  and  on  behalf  of 
said  trust  estate,  and  to  bind  the  same  and  its  property  to  the 
performance  of  such  contracts ;  to  borrow  money  on  behalf  of 
such  trust  estate  on  such  terms  and  conditions  as  said  Trustees 
shall  deem  best,  and  to  bind  said  estate  and  its  assets  to  the 
payment  of  such  indebtedness  and  to  pledge  and  incumber  any 
property  of  said  estate,  whether  real,  personal  or  m.ixed,  for  the 
security  of  the  indebtedness  so  incurred,  under  such  terms  and 


Appendix.  489 

conditions  as  to  the  Trustees  may  seem  best,  and  to  agree  upon, 
approve  and  fix,  execute  and  deliver  in  the  name  and  on  behalf 
of  the  said  trust  estate,  any  deed,  pledge,  mortgage,  bond,  note 
endorsement  or  guarantee,  trust  deed,  or  any  other  instrument 
which  may  be  necessary  or  proper  to  carry  out  the  terms  of 
this  instrument.  But  neither  the  said  Trustees  nor  the  said 
certificate  holders  nor  any  of  them  shall  be  in  any  manner  per- 
sonally liable  by  virtue  of  any  contract,  note,  bond,  deed  of 
trust,  mortgage  or  other  instrument  executed  under  the  terms 
of  this  paragraph,  but  the  same  shall  fully  bind  the  property  of 
the  said  trust  estate  for  the  performance  thereof. 

(B)  The  said  Trustees  are  hereby  authorized  to  do,  or 
cause  to  be  done  in  any  lawful  manner,  all  the  things  which  are 
incidental,  necessary  or  proper  to  carry  fully  into  effect  all  of 
the  purposes  herein  enumerated  or  powers  hereby  conferred,  the 
general  authority  given  being  intended  to  control  and  make 
fully  effective  the  power  and  authority  of  the  Trustees  under 
this  instrument,  notwithstanding  the  specific  enumeration  and 
description  thereof  herein. 

(C)  It  is  expressly  understood  that  all  expense  incurred  by 
said  Trustees  in  carrying  out  the  terms  hereof,  as  well  as  all 
liabilities  incurred  by  them  in  the  execution  of  said  trust, 
whether  arising  from  contract  or  tort,  shall  be  considered  as 
expenses  of  executing  said  trust,  which  shall  first  be  paid  out 
of  the  assets  and  properties  thereof,  and  which  shall  be  a  first 
and  prior  lien  against  the  said  estate  and  property,  superior  to 
all  others. 

(D)  The  said  Trustees  shall,  in  their  own  name,  as  Trus- 
tees of  said  estate,  bring  any  suit  or  action  which  in  their  judg- 
ment shall  be  necessary  or  proper  to  protect  said  estate  or  to 
enforce  any  contract  made  for  the  benefit  thereof,  and  to  de- 
fend in  their  discretion  any  suit  or  action  against  said  estate 


490  Trusts  for  Business  Purposes. 

or  against  the  Trustees  thereof.     The  said  Trtistees  are  ex- 
pressly authorized  to  bring  or  defend  such  suit  in  their  discre- 
tion or  to  compromise  and  settle  any  suit,  claim  or  controversy 
in  which  the  said  estate  is  interested,  as  to  them  may  seem  best, 
and  to  discharge  the  same  out  of  said  estate  and  its  assets ;  and 
they  are  specially  authorized  to  pay  or  transfer  out  of  said 
estate  and  its  assets,  all  sums  of  money  or  property  necessary 
to  discharge  any  judgment  against  them  in  their  said  capacity 
as  Trustees,  together  with  all  court  costs,  or  other  costs,  in- 
cluding counsel  and  attorney's  fees  and  also  to  pay  out  of  said 
estate  or  its  assets,  such  sums  of  money,  or  transfer  or  appro- 
priate property  thereof,  for  the  purpose  of  settling,  compromis- 
ing, or  adjusting  any  such  claim  or  controversy,  together  with 
any  such  costs  and  expenses  connected  therewith,  and  all  of 
such  expenditures  shall  be  treated  as  expenses  of  executing  this 
trust. 

(E)  The  Trustees  shall  have  full  power  to  invest  and  re- 
invest the  trust  estate,  its  profits,  income,  increase,  surplus  or 
avails,  subject  to  the  terms  of  this  instrument.  But  the  trus- 
tees shall  not  delegate  to  any  agent  or  attorney  in  fact,  the 
power  to  contract  on  behalf  of  said  estate,  or  bind  it  to  the 
payment  of  money,  but  when  said  trustees  have  agreed  upon 
the  terms  and  forms  of  any  contract  or  contracts,  or 
other  instrument  or  instruments  necessary  or  proper  for  the 
carrying  out  of  the  purposes  herein  mentioned,  and  the  execu- 
tion of  the  trust  hereby  created,  they  may,  by  resolution  or 
other  written  authority,  designating  and  describing  the  form 
of  such  contract  or  contracts  or  instrument,  authorize  an  agent 
or  agents,  attorney  or  attorneys  in  fact,  to  countersign  and  de- 
liver, in  the  name  and  on  behalf  of  said  Trustees,  any  such  con- 
tract or  instrument,  but  in  no  case  shall  such  agents  or  attorneys 
be  authorized  to  countersign  or  deliver  any  notes,  bonds,  bill  of 


Appendix.  491 

sale,  mortgages,  trust  deeds,  encumbrances,  or  pledges  trans- 
ferring, binding,  encumbering  or  alienating  the  property  of  said 
trust  estate,  whether  real,  personal  or  mixed. 

(F)  The  Trustees  shall  hold  the  legal  title  to  all  property 
at  any  time  belonging  to  their  trust  and  shall  have  and  exercise 
the  exclusive  management  and  control  of  the  same,  and  the 
right  of  the  said  Trustees  to  manage,  control  and  administer 
the  said  trust  estate  shall  be  absolute  and  unconditional,  free 
from  the  control  or  management  of  the  certificate  holders. 

(G)  So  far  as  strangers  to  this  trust  are  concerned,  a  reso- 
lution of  the  Trustees  authorizing  a  particular  act  to  be  done 
shall  be  conclusive  evidence  in  favor  of  such  strangers  that  such 
act  is  vv^ithin  the  powers  of  said  Trustees,  and  no  purchaser  from 
the  Trustees  or  one  loaning  money  to  the  Trustees  shall  be 
bound  to  see  to  the  application  of  the  purchase  money  or  loaned 
money  or  other  consideration  paid  or  delivered  by  or  for  said 
purchaser  or  loaner  to  or  for  said  Trustees. 

FIFTH :  Stated  meetings  of  the  Trustees  shall  be  held  at 
least  once  every  three  months,  and  other  meetings  shall  be  held 
from  time  to  time,  upon  the  call  of  any  officer  or  Trustee.  A 
majority  of  the  Board  of  Trustees  shall  constitute  a  quorum., 
and  the  concurrence  of  all  the  Trustees  shall  not  be  necessary 
to  the  validity  of  any  action  done  by  them,  but  the  wish  of  the 
majority  of  the  Trustees  present  and  voting  at  any  meeting 
shall  be  conclusive,  except  as  hereinafter  provided;  they  may 
adopt  and  use  a  common  seal ;  they  may  make,  adopt,  amend  or 
repeal  such  by-laws,  rules,  and  regulations,  not  inconsistent  with 
the  terms  of  this  instrument,  as  they  may  deem  necessary  for 
the  conduct  of  their  business  or  for  the  government  of  them- 
selves, their  agents  or  representatives. 

SIXTH:  The  Trustees  may  elect  officers,  who  shall  have 
the  authority  and  perform  such  duties  as  the  Trustees  may  de- 


492  Trusts  for  Business  Purposes. 

termine.  They  may  combine  the  duties  of  several  officers  in  one 
person.  Two  of  such  officers,  elected,  at  least,  shall  be  from 
among  their  own  members.  The  Trustees  shall  have  authority 
to  elect  or  appoint  temporary-  officers  to  serve  during  the  ab- 
sence or  disability  of  regular  officers;  to  fix  the  compensation 
of  any  or  all  officers,  agents  or  employees  they  may  appoint,  and 
are  likewise  authorized  to  pay  themselves  such  compensation 
for  their  services  as  they  may  deem  reasonable. 

(B)  The  Trustees  shall  cause  to  be  kept  by  a  Secretary 
elected  by  them,  a  record  of  all  meetings  of  the  beneficiaries 
and  of  the  Trustees,  which  record  shall  be  similar  in  character 
and  of  the  effect  as  that  kept  in  case  of  corporations,  and  so 
far  as  strangers  to  this  trust  are  concerned,  shall  be  conclusive 
against  the  Trustees  of  the  facts  and  doings  therein  stated. 

(C)  Any  Trustee  may  acquire,  own  and  dispose  of  bene- 
ficial interests  in  this  trust  to  the  same  extent  as  if  he  v/ere  not 
a  Trustee  hereof. 

(D)  Any  Trustee  may  be  removed  for  just  cause.  The  term 
"Just  Cause"  as  used  in  this  paragraph,  shall  mean  any  cause 
which  is  detrimental  to  the  interest  of  the  trust  estate  other  than 
political,  racial  or  religious.  Any  Trustee  may  file  charges  for 
just  cause  with  the  Board  of  Trustees  against  any  member 
thereof,  and  the  remaining  members  of  said  Board  of  Trustees 
shall  constitute  a  commission  with  the  exclusive  power  and  au- 
thority to  investigate  and  determine  said  charges. 

(E)  In  case  of  removal  of  any  Trustee,  a  statement  of  the 
cause  therefor  shall  be  set  forth  in  writing,  which  statement 
shall  be  in  duplicate,  and  shall  be  signed  by  the  members  of  the 
Commission.  The  copy  of  said  statement  shall  be  delivered 
personally  to  the  Trustee  so  to  be  removed  and  the  other  copy 
of  said  statement  shall  be  filed  in  the  office  of  the  Trustees  with 
a  notation  thereon  showing  proof  of  service  of  a  copy  of  said 


Appendix.  493 

statement  upon  the  said  Trustee.  Upon  filing  of  a  copy  of  said 
statement,  in  the  office  of  the  Trustees,  the  removal  shall  im- 
mediately become  effective. 

(F)  Whenever  a  Trustee  who  has  been  so  removed,  shall 
file  with  the  Commission,  within  five  days  after  his  removal,  a 
statement  in  writing  alleging  his  removal  was  made  for  political, 
racial,  religious  causes,  or  for  unjust  cause,  and  that  he  believes 
that  upon  a  hearing  he  will  be  able  to  establish  such  fact,  it 
shall  be  the  duty  of  the  Commission  to  order  a  hearing.  The 
time  and  place  of  such  hearing  shall  be  fixed  by  the  Commis- 
sion and  due  notice  thereof  given  to  said  Trustee.  Upon  such 
hearing,  the  Commission  sliall  determine  and  decide  whether  or 
not  the  removal  ^vas  made  for  political,  racial,  religious  causes, 
or  for  unjust  cause,  and  if  the  Commission  finds  in  favor  of  the 
Trustee,  then  he  shall  be  elected  to  ser\^e  the  balance  of  his 
term. 

(G)  In  case  of  death,  resignation  or  removal  of  any  Trus- 
tee, the  remaining  members  of  the  Board  of  Trustees  shall 
have  the  power  and  authority  to  elect  Trustees  to  fill  the 
unexpired  term  or  vacancy  thus  created,  and  for  that  pur- 
pose, a  majority  of  the  remaining  Trustees  shall  be  sufficient 
to  elect  one  or  more  Trustees  as  above  stated,  and  such  Trus- 
tees, as  above  elected,  shall  occupy  the  same  relation  to  this 
Trust  as  if  they  were  original  parties  to  this  instrument.  In 
case  of  death,  resignation  or  disqualification  of  the  entire  Board 
of  Trustees,  a  new  Board  may  be  appointed  for  the  unexpired 
term  by  a  Court  of  Equity  of  competent  jurisdiction. 

(H)  Neither  the  said  certificate  holders  or  any  of  them,  or 
their  property  shall  be  liable  for  any  indebtedness  or  liability 
created  by,  growing  out  of,  or  arising  from  the  execution  of 
the  said  trust  estate,  whether  arising  from  contract  or  tort  of 
the  said  Trustees,  their  servants,  agents  or  employees,  in  the 


494  Trusts  for  Business  Purposes. 

administration  of  said  estate.  The  Trustees,  personally,  nor 
either  of  them,  nor  their  private  property,  whether  real,  per- 
sonal or  mixed,  shall  be  in  any  manner,  liable  for  any  debt  or 
liability  incurred  by  said  Trustees,  or  any  of  them,  in  the  ad- 
ministration or  management  of  the  said  estate,  whether  arising 
from  contract  or  tort  of  the  said  Trustees  or  any  of  them,  or 
their  agents,  servants,  or  employees;  and  neither  said  Trustees 
or  either  of  them  shall  ever  be  held  personally  liable  for  any 
damage  or  injury  to  person  or  property  caused  by  or  arising 
from,  incident  to,  or  growing  out  of  the  execution  of  said  trust; 
nor  shall  they  be  liable  for  the  acts  or  omissions  of  each  other. 
That  the  assets  of  the  said  trust  estate  only,  shall  be  liable  for 
any  indebtedness,  liability,  wrong,  injury  or  tort  incurred,  aris- 
ing out  of  or  growing  out  of,  the  administration  of  the  said 
trust  estate  by  the  said  Trustees  or  any  of  them  or  for  any  act 
or  negligence  or  default  of  their  servants,  agents,  or  employees 
in  the  administration  of  said  estate. 

(I)  The  said  Trustees  shall  use  ordinary  and  reasonable 
diligence  in  the  performance  of  this  trust,  but  shall  not  be 
liable  to  the  certificate  holders  or  any  of  them,  for  any  act,  de- 
fault, failure  or  negligence  in  or  connected  with  the  execution 
of  the  said  trust,  provided,  the  same  shall  not  amount  to  and 
constitute  fraud,  embezzlement  or  wilful  breach  of  trust,  and 
they  shall  not  be  obliged  to  give  bond  to  secure  the  due  per- 
formance of  this  trust  by  them. 

SEVENTH :  That  for  the  purpose  of  evidencing  the  re- 
spective and  proportionate  equitable  interests  of  the  said  cer- 
tificate holders  in  and  to  the  said  trust  estate,  the  said  Trustees 
are  hereby  authorized  and  directed  to  execute  and  deliver  to 
each  such  beneficiary  hereunder,  a  certificate  signed  by  the  ofifi- 
cers  designated  for  that  purpose,  which  shall  evidence  and  set 
forth  how  many  interests  of  the  par  value  of  One  Hundred 


Appendix.  495 

Dollars  ($100.00)  each,  the  said  beneficiary  therein  named  is 
entitled  to  as  a  beneficiary  of  said  trust  estate. 

(B)  The  said  trust  estate  shall  be  divided  into  Twenty-five 
Hundred  (2500)  Common  Beneficial  Interests,  all  of  which  In- 
terests shall  be  of  the  expressed  par  value  of  One  Hundred  Dol- 
lars ($100.00)  each,  and  the  certificates  issued  by  the  Trustees 
to  said  beneficiaries  shall  be  substantially  in  the  following  form, 
to  wit: 

PENNYROYAL  DEVELOPMENT  COMPANY 
Number Shares 

This  certifies  that is  the  holder  of 

shares  in  the  capital  of  the  PENNYROYAL 

DEVELOPMENT  COMPANY,  fully  paid  and  non-assess- 
able, subject  to  Declaration  of  Trust  in  favor  of  said  organiza- 
tion, dated  June  4th,  1921.  and  recorded  in  Todd  County,  Ken- 
tucky, and  transferable  only  on  the  books  of  this  organization, 
in  person  or  by  attorney,  upon  surrender  of  this  certificate  prop- 
erly endorsed. 

IN  WITNESS  WHEREOE,  the  said  organization  has 
caused  this  certificate  to  be  signed  by  its  duly  authorized  officers, 

and  its  seal  to  be  hereunto  affixed  this day  of , 

A.  D.  1921. 


Secretary. 
President. 


Shares  $100.00  each. 

(C)  By  a  unanimous  vote  of  all  the  Trustees  at  any  an- 
nual meeting,  or  special  meeting  called  for  that  purpose,  the 
Trustees  shall  have  the  power,  after  the  Twelve  Hundred  and 
Fifty  (1250)  Common  Beneficial  shares  now  remaining  in  the 
treasury  have  been  sold  and  used  for  the  interest  and  advance- 
ment of  the  Trust  Estate  herein  created,  to  issue  preferred  bene- 
ficial interests  of  said  Trust  Estate,  to  such  an  amount  from 
time  to  time  as  they  shall  deem  expedient  for  the  interest  and 
advancement  of  the  Trust  Estate  herein  created,  and  such  pre- 


496  Trusts  for  Business  Purposes. 

ferred  beneficial  interests  may  be  sold  for  cash,  exchanged  for 
property,  or  distributed  as  dividends,  at  the  option  of  the  trus- 
tees. 

(D)  In  case  of  the  loss  or  destruction  of  any  certificate  of 
beneficial  interests  issued  hereunder,  by  the  Trustees,  the  Trus- 
tees may,  under  such  terms  as  they  may  deem  expedient,  issue 
new  certificates  in  place  of  the  ones  lost  or  destroyed. 

(E)  The  Trustees  may  from  time  to  time  declare  and  pay 
such  dividends  as  are  earned  by  all  outstanding  beneficial  in- 
terests, out  of  the  net  earnings  from  time  to  time  received  by 
them,  as  they  may  deem  advisable;  but  the  amount  of  such  divi- 
dends and  the  payment  of  them,  shall  be  wholly  in  the  discre- 
tion of  the  Trustees,  and  the  surplus  profits  or  earnings  shall 
not  be  maintained  as  separate  fund,  but  shall  be  merged  into 
the  body  of  the  trust  property. 

(F)  Beneficial  interests  hereunder  shall  be  transferable 
only  on  the  books  of  the  Trustees  upon  surrender  of  certificates 
therefor  and  presentation  of  a  written  transfer  thereof.  The 
acceptance  of  a  certificate  of  beneficial  interests  by  the  original 
holder  or  transferee  shall  make  the  person  named  in  said  trans- 
fer of  certificate  a  party  of  this  instrument  as  if  such  party 
had,  in  person,  joined  in  the  execution  thereof. 

(G)  The  name  in  which  a  certificate  of  beneficial  interests 
stands  on  the  books  of  the  Trustees,  shall  be  considered  by  the 
Trustees  conclusive  evidence  of  ownership,  and  they  shall  not 
be  required  upon  transferring  such  certificate,  or  paying  divi- 
dends on  such  interests,  or  distributing  assets  upon  the  termina- 
tion of  the  trust,  or  at  any  other  time,  to  inquire  in  any  way  in- 
to the  relations  between  assignor  and  assigns,  pledgor  or 
pledgee,  trustee  and  beneficiary,  guardian  and  ward,  or  in  any 
other  similar  relation,  and  shall  have  the  right  to  conclusively 
presume  without  inquiry,  tliat  the  holder  of  any  such  certificate 


Appe;ndix.  497 

as  shown  by  their  books  is  the  real  and  true  and  unconditional 
owner  thereof. 

'  EIGHTH:  Annual  meetings  for  the  election  of  Trustees 
and  for  the  transaction  of  other  business  shall  be  on  the  first 
Tuesday  in  June,  following  the  first  Monday  in  June,  each  year, 
commencing  in  1922,  of  which  meeting  the  secretary  or  acting 
secretary,  shall  give  notice  by  mail  to  each  Trustee  at  his  regis- 
tered address  at  least  ten  days  before  such  meeting,  but  failure 
to  give  notice  of  such  meeting  shall  not  invalidate  the  proceed- 
ings of  the  meeting. 

(B)  The  Trustees  may  call  the  certificate  holders  together 
at  the  annual  meeting  of  said  Trustees,  upon  ten  days'  notice 
given  as  aforesaid,  at  which  meeting  the  Trustees  may  submit 
an  annual,  or  such  other  reports  as  they  may  deem  advisable,  to 
said  certificate  holders  for  their  information,  and  the  certificate 
holders,  at  such  annual  meeting,  may  nominate  from  among 
themselves,  candidates  for  the  office  of  Trustees,  presenting 
such  nominations  to  the  Board  of  Trustees,  but  the  election  of 
such  nominees,  by  the  Trustees,  shall  be  wholly  optional  with 
said  Trustees.  The  fiscal  year  shall  end  each  year  on  December 
31st. 

NINTH :  The  death  of  a  beneficiary  or  of  a  Trustee  during 
the  continuance  of  this  trust  shall  not  operate  to  terminate  the 
trust,  nor  shall  it  entitle  the  legal  representative  of  the  de- 
ceased certificate  holder  to  an  accounting,  or  to  take  any  action 
in  the  courts,  or  elsewhere,  against  the  Trustees ;  but  the  ex- 
ecutors, administrators  or  assigns  of  any  deceased  certificate 
holder  shall  succeed  to  the  rights  of  said  decedent  under  this 
trust,  upon  surrender  for  transfer,  of  the  certificates  for  the 
interests  held  by  him. 

(B)  It  is  expressly  agreed  that  the  said  trust  shall  not  be 
terminated  or  the  administration  thereof  in  any  wise  interfered 


498  Trusts  for  Business  Purposes. 

with  or  suspended  by  the  death  of  any  such  beneficiary,  or  his 
incapacity  for  any  reason,  or  by  his  said  interest  or  interests 
being  by  process  of  law  subjected  to  the  payment  of  debts,  or 
in  any  way  vested  in  any  heir,  assign,  creditor,  or  purchaser,  of 
the  said  beneficiary,  or  in  any  trustee,  assignee  or  officer  of  any 
court,  or  by  the  same  in  any  manner  being  divested  out  of  the 
beneficiary  and  transferred  or  vested  in  any  other  person,  ad- 
ministrator, executor,  trustee,  assignee,  or  personal  representa- 
tive. But  any  such  person  who  may,  in  any  such  manner  ac- 
quire or  become  vested  with  the  ownership  of  such  certificate, 
shall  thereupon  succeed  to  and  become  entitled  to  all  the  rights 
and  equities  of  the  beneficiary  therein  named,  and  the  benefi- 
cial interests  in  the  said  trust  estate,  upon  surrendering  the 
original  certificate  to  the  said  Trustees  with  such  proof  of  own- 
ership as  may  be  reasonably  required  by  them,  and  the  issue  in 
lieu  thereof  of  a  new  certificate,  and  notwithstanding  said 
change  of  ownership  or  interest  in  any  such  certificate,  or  death 
or  insolvency  of  the  original  owner  thereof,  the  said  trust  estate 
shall  continue  and  remain  in  full  force  until  terminated  as 
herein  provided. 

(C)  The  ownership  of  interests  hereunder  sliall  not  entitle 
the  certificate  holder  to  any  title  in  or  to  the  trust  property 
whatsoever,  or  right  to  call  for  a  partition  or  division  of  the 
same,  or  for  an  accounting,  or  for  any  voice  or  control  what- 
soever of  the  trust  property  or  of  the  management  of  said  prop- 
erty or  business  connected  therewith  by  the  Trustees. 

TENTH :  The  Trustees  hereunder  shall,  in  entering  into 
contracts  and  in  the  execution  of  notes,  bonds,  or  other  written 
instruments  obligatory  upon  the  said  estate,  set  forth  in  ap- 
propriate terms  that  the  said  instruments  are  not  entered  into 
by  them  nor  binding  upon  them  individually,  but  only  as  Trus- 
tees of  this  estate,  and  that  contracts  or  obligations  are  to  be 


Appendix.  499 

satisfied  or  performed  out  of  the  assets  of  said  trust  estate 
only.  But  the  failure  or  neglect  of  such  Trustee  or  Trustees  to 
so  declare  in  any  instrument,  contract  or  obligation  entered  into 
for  the  purpose  of  carrying  out  the  objects  of  said  trust,  shall 
not  be  construed  to  render  said  Trustees  or  any  of  them,  in- 
dividually liable  thereon,  but  the  same  shall  be  obligations  bind- 
ing upon  and  performable  only  out  of  the  assets  of  said  trust 
estate. 

(B)  It  is  further  expressly  agreed  that  the  said  Trustees 
are  fully  authorized  in  their  capacity  as  such  and  for  and  on 
behalf  of  said  trust,  to  receive,  collect,  receipt  and  give  full  re- 
leases, acquittances  and  discharges  for  any  sums  of  money 
v^hich  may  be  payable  to  them  as  said  Trustees  for  the  benefit 
of  said  trust,  or  for  any  property  or  any  other  thing  of  value 
which  they  may  be  entitled  to  receive  on  behalf  of  said  trust. 

ELEVENTH:  This  trust  shall  not  continue  in  any  event 
longer  than  for  the  term  of  twenty-one  years  after  the  death  of 
the  Subscriber,  at  which  time  the  then  Board  of  Trustees  shall 
proceed  to  wind  up  its  affairs,  liquidate  its  assets,  and  distribute 
the  same  among  the  certificate  holders  of  the  beneficial  interests 
according  to  the  number  of  interests  held  by  them. 

(B)  For  the  purpose  of  winding  up  their  affairs  and  liquid- 
ating the  assets  of  the  trust,  the  then  Board  of  Trustees  shall 
continue  in  office  until  such  duties  have  been  performed. 

IN  WITNESS  WHEREOF,  the  said  Edmond  J.  Ware, 
Joseph  K.  Ryan,  Russell  Hogan,  George  E.  Garth  and  William 
F.  Ware,  Trustees,  hereinbefore  mentioned,  have  set  their 
hands  and  seals  in  token  of  their  acceptance  of  the  trust  herein 
specified,  for  themselves  and  their  successors;  and  the  said 
William  F.  Ware,  Subscriber,  has  hereunto  set  his  hand  and 
seal  in  token  of  his  assent  to  and  approval  of  said  terms  of 


roo  Trusts  for  Business  Purposes. 

trust  tor  himself  and  his  assigns,  the  day  and  year  first  above 


written. 


Trustee  ( Seal ) 

Trustee  ( Seal ) 

Trustee  ( Seal) 

'. .  .Trustee  (Seal) 

Trustee  ( Seal ) 

Subscriber  ( Seal) 

State  oe  Kentucky  | 

•  r  SS 

County  oe  Todd  3 

I,  a  Notary  Public  in 

and  for  said  County  aforesaid,  do  hereby  certify  that  Edmond 
J.  Ware,  Joseph  K.  Ryan,  Russell  Hogan,  George  E.  Garth 
and  William  F.  Ware,  personally  known  to  be  the  same  per- 
sons whose  names  are  subscribed  to  the  foregoing  instrument, 
appeared  before  me  this  day  in  person,  and  acknowledged 
that  they  signed,  sealed  and  delivered  the  said  instrument  as 
their  free  and  voluntary  act  for  the  uses  and  purposes  therein 
set  forth. 

Given  under  my  hand  and  official  seal  this  day 

of  June,  A.  D.  1921. 


Notary  Public. 


SCHEDULE  A. 


I,  William  F.  Ware,  Subscriber  to  the  Declaration  of  Trust 
herein,  hereby  transfer,  assign  and  deliver  to  the  Trustees, 
for  the  purposes  set  forth  in  the  Trust,  all  my  right,  title 
and  interest  which  I  now  have  in  certain  leases.  The  fol- 
lowing is  a  list  of  the  names  of  the  owners  of  the  fee  of  the 


AP] 

PEINDIX. 

501 

said  leases,  number  of  acres 

leased,  date  of  lease  and  date  of 

expiration  of  leases : 

Name 

Acres 

Date 

Due 

Watts  Bros., 

640 

I 1-3- I 9 

1 1 -3-2 1 

J.  L.  Lawson, 

380 

11-3-19 

I 1-3-2 I 

Mrs.  Eula  Garth, 

208 

I 1-29-19 

1 1 -29-2 1 

F.  B.  Graham, 

302 

1 1-7- 1 9 

I I -7-2 I 

WilHe  Fox, 

123 

11-12-19 

11-12-21 

W.  H.  Ryals, 

175 

1-15-20 

6-1 5-2 I 

D.   M.   Christian, 

117 

10-30-19 

10-30-21 

Y.    G.   Jones, 

96 

11-3-19 

1 1 -3-2 1 

Mrs.  M.  E.   Jackson, 

125 

11-5-19 

I 1-5-2 I 

H.  L.  Tutt, 

191 

11-12-19 

11-12-21 

Mrs.  N.  H.  Carneal, 

205 

11-6-19 

11-6-21 

R.  W.  Jefferies, 

125 

11-5-19 

1 1-5-2 1 

C.  R.  Dickinson, 

150 

5-13-20 

11-13-21 

T.  D.  Smith, 

495 

11-12-19 

11-12-21 

Wright  Bros., 

247 

11-7-19 

I I -7-2 I 

D.  H.  Powell, 

280 

10-31-19 

10-3 1-2 I 

E.  H.  Dickinson, 

220 

4-19-20 

I 0-19-2 I 

Tom  Duerson, 

104 

5-15-20 

10-15-21 

Mrs.  Daisy  Shelton, 

75 

5-15-20 

1Q-15-21 

F.  Rives  &  J.  C.  Crews, 

149 

5-6-20 

1Q-6-21 

E.  N.  Wakefield, 

93 

4-30-20 

9-30-21 

J.  W.  Tyler  &  J.  W.  Roberts 

,      134 

6-7-20 

6-7-21 

Jim  Camp, 

125 

10-30-19 

10-30-21 

Ashton  Waller, 

400 

11-1-19 

11-1-21 

H.  R.  Dickinson, 

400 

5-13-20 

11-13-21 

I.  M.  Jackson, 

165 

11-6-19 

1 1-6-2 1 

Mrs.  Belle  Stack, 

285 

11-7-19 

1 1 -7-2 1 

C.  M.  Waller, 

270 

5-13-20 

11-13-21 

Repo  Arwin, 

300 

5-13-20 

11-13-21 

502  Trusts  for  Business  Purposes. 

Nam]^  Acres      Date  Due 

Ed  Butler,  225      5-13-20        11-13-21 

J.  A.  Spicer,  188       11-13-19       11-13-21 

O.  D.  Boxley,  521       5-3-20  11-13-21 

W.  T.  Payne,  98       5-6-20  1 1-5-2 1 

J.  E.  Byars,  150       5-^20  11-6-21 

O.  W.  Wilson,  540       5-5-20  11-5-21 

George  Minims,  300       4-12-20         10-12-21 

W.  E.  Jackson,  327       1-30-20         6-30-21 

N.  B.  Hopson,  407       5-15-20         11-15-21 

R.  W.  Harris,  144       11-10-19       ii-ic^22 

J.C.Young,  105       11-13-19       11-13-21 

W.  G.  Duerson,  335       5-8-20  11-8-21 

B.A.Camp,  180       5-7-20  11-7-21 

B.F.Mitchell,  150       5-3-20  11-3-21 

Trustee      (Seal) 

Trustee      (Seal) 

Trustee      (Seal) 

Trustee     (Seal) 

Trustee      (Seal) 

Subscriber      ( Seal) 


1 


Appendix.  503 

THE    GREAT   AMERICAN  HOME   SAVINGS   INSTITU- 
TION. 

Adjudicated  in  State  v.  Lee,  233  S.  W.  20, 

This  agreement  and  declaration  of  trust  for  the  formation 
and  administration  of  an  unincorporated  association  to  be 
known  and  styled  as  the  Great  American  Home  Savings 
Institution  made  and  executed  this  27th  day  of  October, 
1920,  by  and  between  C.  R.  Bramblet,  G.  L.  Faulhaber,  F.  C. 
Shryock,  R.  L.  Gurney,  Samuel  Niccols,  J.  B.  Murphy,  H.  H. 
Scheer,  and  such  persons  who  may  become  additional  trus- 
tees under  the  terms  hereof,  all  of  whom  are  hereinafter  col- 
lectively designated  as  "trustees". 

Witnesseth,  Whereas,  the  parties  hereto,  and  those  who 
may  hereafter  become  associated  with  them,  as  herein  pro- 
vided, desire  to  form  a  voluntary  association  for  the  purpose 
of  availing  themselves  of  the  provisions  of  the  laws  of  Mis- 
souri applicable  thereto  and  particularly  of  the  provisions 
of  Section  3431a,  R.  S.  Mo.  1909,  as  found  in  the  Session 
Acts  of  1919,  at  page  226,  for  the  purpose  of  accumulating 
a  fund  to  be  used  as  herein  provided  under  the  terms  of  said 
section  for  the  purchase  or  building  of  houses,  the  acquisition 
of  farming  lands,  or  other  income  property,  or  paying  off 
mortgage,  or  other  incumbrance,  and  desire  also  to  provide  a 
fund  to  be  raised  by  the  said  trustees  for  the  protection  and 
security  of  persons  contributing  as  investors  or  depositors 
to  any  fund  or  funds  herein  contemplated,  and  to  furnish 
capital  for  the  administration  of  all  of  the  business  and  af- 
fairs of  said  institution,  and  to  provide  loans  therefrom  to  the 
contributors  to  said  funds,  and  to  such  ends  to  publish  and 
declare  the  terms,  conditions,  regulations  and  stipulations  on 


504  Trusts  for  Business  Purposes. 

which  all  and  every  such  funds  herein  provided  for  may  be 
accumulated,  held,  managed,  invested,  reinvested,  loaned,  ex- 
pended and  distributed. 

Now,  therefore,  in  consideration  of  the  premises  and  the 
terms,  stipulations,  condition,  regulations  and  provisions 
hereof,  the  parties  hereto  for  themselves,  their  successors  in 
trust  and  those  who  may  hereafter  become  trustees,  for  the 
use,  benefit  and  protection  of  all  persons  who  may  become  the 
holders  or  owners  of  any  of  the  certificates  herein  provided 
to  be  issued,  agree  and  declare  as  follows : 

Name. 

I.  The  business  shall  be  conducted  under  and  known  by 
the  style  and  name  of 

Great  American  Home  Savings  Institution 
and  when  the  said  name  is  signed  by  any  officer  or  employee, 
duly  authorized  by  the  board  of  directors,  it  shall  bind  the 
assets  or  funds  of  this  institution  to  the  extent  authorized 
under  the  terms  hereof  and  all  persons  may  sue  said  directors 
ofiicially  or  in  the  name  of  the  Great  American  Home  Savings 
Institution  and  any  judgment  obtained  on  any  such  claim  shall 
be  paid  solely  out  of  the  assets  of  said  institution,  and  all 
persons  having  claims  against  said  institution  on  account  of 
credit  extended  thereto,  are  hereby  authorized  to  enforce  pay- 
ment out  of  any  funds  belonging  to  said  institution  which 
have  not  been  specifically  set  aside  for  the  benefit  of  other 
classes  of  .  persons  or  claimants.  The  directors  shall  have 
the  right  and  authority  by  all  proper  proceedings  and  in  all 
courts  of  competent  jurisdiction,  to  sue  for  and  recover  all 
of  the  assets,  and  enforce  any  and  all  of  the  rights  of  the 
institution. 


Appendix.  505 

Liability  and  Indemnity — Notice. 

2.  No  trustee,  director  or  officer  of  said  institution  shall 
be  personally  liable  for  any  debts  properly  chargeable  against 
said  institution  or  any  fund  or  funds  thereof, 

If  any  such  persons  shall  be  compelled  to  pay  out  of  his 
or  their  own  proper  funds  any  such  claim,  such  person  shall 
be  entitled  to  indemnity  from  any  funds  or  assets  available  for 
that  purpose,  with  interest  thereon  from  the  date  of  payment 
at  the  rate  of  6  per  cent  per  annum  until  paid;  provided,  any 
such  claim  shall  not  be  collectable  from  the  loan  and  trust 
fund  as  hereinafter  established,  unless  the  funds  so  paid  out 
have  been  expended  for  the  benefit  and  protection  of  said 
fund. 

Objects,  Purposes  and  Powers. 

3.  The  objects  and  purposes  of  this  association  are  de- 
clared to  be,  (a)  to  provide  for  the  accumulation  of  a  fund  or 
funds  to  be  used  as  herein  provided  for  the  purpose  of  en- 
abling contributors  thereto,  to  purchase  or  build  homes,  ac- 
quire farming  lands  or  other  income  property,  and  pay  off 
mortgages,  other  incumbrances,  or  make  improvements;  (b) 
to  provide  for  the  issue  of  trust  certificates  on  the  partial 
payment  or  installment  plan;  (c)  to  provide  for  the  issue 
of  full-paid  interest-bearing  certificates;  (d)  to  provide  for 
the  issue  of  trustees'  certificates  (e)  to  provide  for  and  de- 
fine the  rights  and  limitations  of  the  various  classes  of  cer- 
tificate owners;  (f)  to  provide  for  and  grant  authority  to  a 
committee  of  the  trustees  as  directors  to  administer  the  said 
trust  and  to  fix  the  rate  of  interest  liability  to  be  assumed  on 
account  of  any  class  of  certificate  issued  hereunder,  and  limit 
said  interest  liability  thereon,  and  on  the  loan  and  trust  fund; 


5o6  Trusts  for  Business  Purposes. 

(g)   to  provide  for  and  fix  the  purposes,  uses  and  disposi- 
tion to  be  made  of  said  loan  and  trust  fund  and  the  regula- 
tions   for    its    loan    or    investment    and    the    accumulations 
thereon;    (h)   to  provide  authority  in  the  directors  to  make 
loans    from   said  loan   and  trust   fund  to   certificate  owners 
contributing  to   such   fund;    (i)    to  provide   for  the  distribu- 
tion of  any  surplus  profits  accruing  from  the  management  of 
the  institution;    (j)    to  provide  authority  in  the  directors  to 
procure  insurance  on  property  in  which  the  institution  is  in 
any  way  interested  against  loss  by  fire  or  from  other  casu- 
alty;   (k)    to  provide  authority  in  the   directors   to   procure 
indemnity  to  said  institution  against  loss  on  account  of  any 
property  acquired  under  foreclosure;    (1)   to  provide  author- 
ity in  the  directors  to  make  provision  for  all  necessary  ex- 
penses incurred  in  the  operation  or  management  of  the  trust 
herein  created;   (m)   to  provide  authority  in  the  directors  to 
fix  the  compensation  of  trustees,  directors,  officers,  agent  and 
employees   for   services  actually   rendered  to   said  institution 
in  any  capacity;   (n)   to  provide  authority  in  the  trustees  or 
directors  to  make,  alter,  repeal  and  enact  by-laws,  rules,  regu- 
lations and  resolutions  for  the  government,  management,  con- 
trol and  disposition  of  the  assets  of  said  institution,  its  assets, 
or  funds,  and  its  officers,  agents,  and  employees,  and  therein 
fix  and  define  any  powers  of  the  trustees  or  directors  which 
may  become  necessary  and  proper  to  be  fixed  and  defined  in 
order  to  the  full  exercise  of  control  over  said  institution,  its 
assets,   funds,  officers,  agents  and  employees;  provided,  that 
no    such   by-laws,    rules,    regulations    or   resolutions    shall   be 
valid  if  in  conflict  with  the  constitution  or  laws  of  the  State  of 
Missouri  or  the  provisions  thereof. 


Appendix,  507 

Trust  Certificates. 

4.  All  persons  who  apply  for  and  are  granted  participa- 
tion in  the  said  loan  and  trust  fund,  shall  become  by  the 
acceptance  of  their  application  therefor,  bound  by  the  several 
provisions  of  the  certificate  issued  to  them  and  the  terms, 
stipulations,  conditions,  regulations  and  provisions  hereof,  as 
fully  as  though  each  person  had  actually  accepted  a  certificate 
containing  this  agreement  printed  or  written  therein  in  full; 

Certificates  issued  to  all  persons  applying  for  the  benefits 
of  said  loan  and  trust  fund  and  accepted  under  the  rules  of 
the  institution,  as  contributors  thereto,  shall  be  substantially 
in  the  following  form: 

Other  Certificates — Changes. 

5.  All  other  certificates  herein  contemplated  or  authorized 
to  be  issued,  under  the  terms  of  this  instrument  or  any  amend- 
ment thereof,  shall  be  in  the  form  prescribed  by  the  board  of 
directors  and  the  approval  of  the  Supervisor  of  Building  and 
Loan  Associations  of  the  State  of  Missouri ;  and  on  like  ap- 
proval, they  may  alter  the  form  of  trust  certificate  hereinabove 
set  forth. 

Books  of  Account  and  Records. 

6.  The  board  of  directors  shall  cause  a  full  and  accurate 
set  of  books  of  account  to  be  kept,  in  which  shall  be  recorded 
all  of  the  financial  transactions  of  the  institution.  A  full 
report  of  the  financial  condition  shall  be  made  by  the  presi- 
dent of  the  trust  at  all  annual  meetings  of  the  trustees,  and 
at  special  meetings  thereof  when  included  as  an  object  in 
the  call  therefor.  The  secretary  or  other  person  designated 
by  the  board  of  directors  shall  keep  accurate  minutes  of  the 


5o8  Trusts  for  Business  Purposes. 

proceedings  of  all  trustees'  meetings,  all  board  of  directors' 
meetings  and  all  proceedings  of  committees  appointed  by  the 
board.  The  minutes  of  all  proceedings  of  such  committees 
shall  be  reported  to  the  board  for  action  thereon. 

Board  of  Directors — Officers  Elected  By. 

7.  The  board  of  directors  shall  provide  by  proper  by-laws 
for  the  election  within  two  weeks  after  each  annual  meeting 
of  the  trustees  of  a  president,  one  or  more  vice-presidents, 
a  treasurer,  a  secretary  and  such  other  officers  as  it  may  deem 
necessary,  and  define  their  powers  and  duties. 

The  compensation  of  all  officers  shall  be  fixed  by  the  board 
of  directors  and  of  all  agents  and  employes,  by  the  board 
or  such  officers  as  they  may  designate. 

All  directors  and  officers  named  may  be  removed  by  the 
board  on  notice  and  hearing  as  the  by-laws  provide ;  and  all 
other  officers,  agents  and  employes  at  the  pleasure  of  the  board 
or  as  the  by-law^s  may  provide. 

8.  Trust  certificates  issued  on  the  partial  payment  plan 
shall  be  in  denominations  of  not  less  than  $1,000.00  nor  more 
than  $10,000.00  on  one  application,  but  may  be  issued  in  the 
sum  of  $1,000,00  or  any  multiple  of  $100.00  in  excess  there- 
of, and  providing  for  a  monthly  deposit  of  65  cents  per 
month  per  each  $100.00  face  value  for  eleven  years,  and  pro- 

■  vided,  if  certificate  owner  desires  more  than  the  maximum  of 
$10,000.00,  same  may  be  issued  in  two  or  more  certificates. 
Full-paid  certificates  may  be  issued  in  denominations  of 
$50.00  or  any  multiple  thereof  for  not  less  than  six  months, 
nor  more  than  eleven  years,  with  interest  payable  annually  or 
semi-annually ;  provided  the  interest  to  be  paid  thereon  shall 
not  be  greater  in  amount  in  per  annum  percentage  paid  than 


Appendix.  509 

interest  earned  on  loans  made,  and  said  full-paid  certificates 
shall  not  be  issued  in  greater  volume  than  is  necessary  to 
meet  and  fill  immediate  loan  demands  from  certificate  owners. 

Loan   and  Trust   Fund  and   Other  Funds.    " 

9.  The  board  of  directors  shall  provide,  establish  and  at 
all  times  maintain  unimpaired,  a  "loan  and  trust  fund"  and 
such  other  funds  of  a  trust  character  as  may  be  necessary 
to  fulfill  the  obligations  of  said  Great  American  Home  Sav- 
ings Institution,  under  the  terms  of  any  class  of  certificate 
issued  under  the  authority  hereof  and  said  "loan  and  trust 
fund"  shall  be  sufficient  in  amount — when  improved  with  in- 
terest at  the  rate  of  four  (4%)  per  cent  per  annum  com- 
pounded monthly — to  equal  the  accrued  value  of  the  certi- 
ficates issued  and  in  force  at  all  times  and  sufificient  to  equal 
their  face  value  at  maturity  date  thereof,  based  on  interest 
at  the  rate  of  4%  per  annum  as  aforesaid,  and  said  "loan 
and  trust  fund"  shall  be  increased  to  the  extent  of  the  surplus 
earnings,  from  fines,  transfer  fees,  cash-surrender  and  partial 
paid-up  certificates.  The  said  "loan  and  trust  fund"  shall 
be  for  the  benefit  of  certificate  owners  contributing  thereto, 
and  may  be  used  for  any  of  the  following  purposes;  in  mak- 
ing loans  to  certificate  owners  in  the  order  of  their  written 
application  therefor,  for  the  purpose  of  purchasing  or  build- 
ing a  home,  purchase  of  farm,  or  other  improved  income 
property,  or  making  improvements  thereon ;  or  paying  ofif 
mortgage  or  other  incumbrance  and  paying  certificates  their 
full  face  value  at  their  maturity  date — with  their  equitable 
share  of  surplus  earnings  not  to  exceed  the  maximum  named 
in  the  certificate ;  or  for  paying  cash-surrender  and  partial 
paid-up  certificates. 


5IO  Trusts  for  Busineiss  Purposes. 

The  first  three  monthly  deposits  made  on  said  trust  cer- 
tificates and  30  cents  per  each  $1,000.00  face  value  thereof, 
of  each  subsequent  monthly  deposit  made  thereon,  shall  be- 
long to  the  general  funds  of  the  trust. 

After  providing  for  all  obligations  to  certificate  owners  of 
all  classes  as  provided  for  by  the  terms  of  their  respective 
certificates,  including  their  equitable  share  of  surplus  earnings, 
all  additional  earnings,  if  any,  shall  belong  to  the  general 
funds  of  the  trust. 

Trustees'  Annual  and  Special  Meetings. 

10.  The  trustees  shall  meet  annually  on  the  first  Tuesday 
of  November  in  each  year  during  the  continuance  of  this 
trust,  beginning  in  the  year  of  1922,  and  at  such  place  and 
times  as  they  may  determine  or  in  default  thereof,  as  the 
board  of  directors  may  designate.  The  trustees  may  hold 
special  meetings  for  the  exercise  of  any  of  their  powers,  on 
the  call  of  the  president,  when  directed  by  the  board  in  writ- 
ing or  requested  by  25  per  cent  of  the  trustees  owning  trus- 
tees' certificates  entitled  to  vote  at  trustees'  meetings.  The 
call  for  every  special  meeting  shall  state  the  time,  place  and 
object  of  the  meeting  and  the  authority  causing  such  call  to 
be  issued.  No  business  except  such  as  is  stated  in  the  call 
therefor  shall  be  transacted  at  any  special  meeting  of  the 
trustees,  without  the  unanimous  consent  of  the  holders  of  all 
issued  and  outstanding  trustees'  certificates  entitled  to  vote 
at  such  meeting,  given  in  person  or  by  proxy  duly  authorized 
in  writing. 

Notice  of  all  annual  and  special  meetings  of  the  trustees 
shall  be  mailed  by  the  secretary  to  each  trustee,  postage  pre- 
paid to  his  last  known  address,  as  appears  by  the  books  of 


Appendix.  511 

the  trust,  at  least  twenty  days  before  the  time  set  for  such 
meeting;  and  all  of  such  trustees  hereby  constitute  the  United 
States  Post  Office  as  his  agent  to  receive  and  deliver  such 
notice. 

If  for  any  reason,  any  annual  meeting  of  the  trustees  shall 
not  be  held  at  the  time  designated  in  such  notice,  it  shall  be 
the  duty  of  its  president  to  call  such  annual  meeting  within 
sixty  days  thereafter,  and  such  meeting  when  assembled  shall 
possess  all  the  powers  of  the  meeting,  had  same  been  held  at 
the  time  and  place  herein  and  in  said  notice  designated. 

At  all  annual  and  special  meetings  of  the  trustees  the 
owners  of  25%  in  par  value  of  the  issued  and  outstanding 
trustee  certificates  shall  be  necessary  to  constitute  a  quorum 
for  the  transaction  of  business,  but  a  smaller  number  may 
adjourn  to  a  different  time  or  place.  All  questions  to  be 
voted  upon  at  any  meeting  of  said  trustees  shall  be  determined 
by  a  majority  vote  of  the  total  number  of  votes  represented 
thereat  in  person  or  by  proxy. 

Amount  of  Loan  Made;. 

II.  No  loan  shall  be  made  on  any  property  in  excess  of 
fifteen  thousand  dollars  ($15,000.00)  nor  to  exceed  seventy- 
five  per  cent  (75%)  of  the  actual  cash  value  thereof,  as  deter- 
mined by  the  Great  American  Home  Savings  Institution,  or 
its  duly  appointed  appraiser,  due  consideration  being  given 
to  the  income  value  thereof,  provided  if  the  loan  and  trust 
fund  shall  at  any  time  become  in  amount  larger  than  the  de- 
mand for  loans  from  certificate  owners  to  borrow,  the  di- 
rectors are  hereby  vested  with  the  power  and  authority  to 
loan  said  funds  on  straight  mortgage  real  estate  loans ;  but 
to  none  but  certificate  owners  so  long  as  there  is  adequate 


512  Trusts  for  Business  Purposes. 

demand   from  said  certificate  owners  to  borrow  on  security 
within  the  requirements  hereof. 

Trustee  Certificates. 

12.  In  furtherance  of  the  objects,  purposes  and  powers 
herein  enumerated  and  in  order  to  raise  funds  to  meet  imme- 
diate loan  demands  from  certificate  owners  as  contributors 
to  the  loan  and  trust  fund,  the  board  of  directors  shall  issue 
to  the  trustees  signing  this  instrument  and  such  persons  who 
may  desire  under  its  rules  to  become  trustees  hereunder,  when 
fully  paid  for  at  not  less  than  their  par  value,  trustees'  cer- 
tificates in  any  aggregate  amount,  not  to  exceed,  however, 
$100,000.00  in  par  value.  Said  certificate  shall  be  issued  only 
to  bona  fide  trustees  who  become  parties  to  this  declaration 
of  trust  by  duly  signing  this  instrument  or  accepting  a  trus- 
tees' certificate  and  their  assigns  or  legal  representative.  Said 
trustees'  certificates  shall  be  redeemable  only  at  the  expiration 
of  this  trust  agreement  or  its  termination  from  any  cause; 
and  in  consideration  of  their  character,  furnishing  a  revolving 
fund  to  be  loaned  to  persons  entitled  to  participate  in  said 
loan  and  trust  fund,  the  owners  of  said  trustees'  certificates 
shall  have  the  exclusive  right  to  vote  on  all  questions  to  be 
determined  hereunder,  at  the  meetings  of  the  trustees. 

The  owmers  of  said  trustees'  certificates  shall  be  entitled  to 
one  vote  cast  in  person  or  by  proxy  in  the  form  prescribed 
by  the  board  of  directors,  per  each  unit  of  one  hundred 
($100.00)  dollars  of  par  value  on  each  certificate  owned;  pro- 
vided, that  in  the  election  of  directors  the  number  of  votes 
entitled  to  be  cast  may  be  multiplied  by  the  number  of  di- 
rectors to  be  elected  and  apportioned  among  any  number  less 
than  the  whole  or  cast  for  one  director  as  such  trustee  may 


Appendix.  513 

desire ;  and,  provided,  further,  that  no  person  shall  be  entitled 
to  vote  for  director  unless  his  certificate  or  certificates  for  the 
units  sought  to  be  voted  shall  have  stood  on  the  books  of  the 
institution,  in  the  name  of  the  person  seeking  to  so  vote  in 
person  or  by  proxy,  for  at  least  thirty  days  before  the  meet- 
ing at  which  he  seeks  to  so  vote  is,  or  should  have  been,  held 
under  the  terms  hereof. 

Dividends  may  be  declared  out  of  the  net  earnings  of  the  ' 
institution  by  an  equal  percentage  on  the  par  value  of  all 
issued  and  outstanding  trustees'  certificates ;  provided,  that 
the  payment  of  said  dividend  shall  in  no  way  impair  said  loan 
and  trust  fund  or  deprive  the  holders  of  trust  certificates  or 
the  holders  of  any  other  class  of  participation  certificates  of 
their  equitable  proportion  or  any  surplus  earnings.  The  in- 
terest required  to  be  accumulated  in  order  to  meet  the  amount 
due  on  trust  or  other  certificates  shall  be  set  aside  before 
the  owners  of  said  trustees'  certificates  shall  be  entitled  to 
dividends. 

The  amount  of  trustees'  certificates  may  be  increased  to 
any  sum  in  excess  of  one  hundred  thousand  ($100,000.00) 
dollars  by  a  majority  vote  of  any  annual  or  special  meeting 
of  the  trustees  called,  and  held  as  herein  provided,  and  shall 
be  entitled  to  the  right,  priority  and  preferences  as  deter- 
mined by  the  resolution  providing  for  such  issue,  not  incon- 
sistent with  the  terms  hereof. 

The  proceeds  received  from  subscriptions  to  any  such  trus- 
tees' certificates,  not  to  exceed  their  par  value  per  unit,  shall 
be  held  liable  to  guarantee  all  liabilities  to  certificate  owners 
of  all  other  classes,  and  the  maintenance  of  the  loan  and  trust 
fund  at  all  times  unimpaired. 


514  Trusts  for  Business  Purposes. 

Liability  of  Trustees. 

13.  Trustee  certificates  shall  be  issued  to  each  trustee 
evidencing  their  interests  in  such  form  as  the  directors  may 
provide,  and  said  certificate  shall  contain  a  clause  that  this 
certificate  is  full  paid  and  non-assessable,  and  when  the  said 
certificate  has  been  paid  for  in  cash  at  its  par  value,  the  lia- 
bility of  said  trustee  is  hereby  limited  to  the  funds  invested 
therein. 

Compensation — Trustees,  Directors  and  Empeoyes. 

14.  The  directors  of  the  trustees  shall  determine  and  fix 
all  compensation  of  trustees,  officers,  agents  or  other  em- 
ployes, for  services  rendered  in  any  and  all  capacities,  whether 
in  the  form  of  salaries  or  commissions,  and  provide  means 
for  the  payment  thereof;  provided  said  compensation  shall 
HI  no  way  be  paid  out  of,  or  impair  the  loan  and  trust  fund 
as  herein  created. 

Board  of  Directors. 

15.  A  committee  of  their  own  number,  to  consist  of  not 
less  than  five  or  more  than  eleven,  as  determined  by  resolu- 
tion of  each  meeting  if  a  change  in  number  be  desired,  to 
be  known  as  the  board  of  directors,  shall  be  elected  by  the 
trustees,  at  each  annual  meeting  to  hold  the  legal  title  to  all 
of  the  assets  of  the  trust  for  its  use  and  benefit  and  for  the 
use  and  benefit  of  all  persons  who  may  be  entitled  to  a  bene- 
ficial interest  therein. 

The  board  of  directors  shall  be  vested  with  the  right  to 
exercise  all  of  the  powers  herein  enumerated,  and  particu- 
larly those  stated  in  the  third  clause  hereof  headed  "Objects 
— Purposes  and  Powers." 


I 


Appendix,  515 

The  board  of  directors  shall  be  charged  with  the  duty  of 
taking  all  proper  action,  by  all  appropriate  methods,  in  order 
to  have  the  proper,  fair  and  equitable  administration  of  the 
affairs  and  business  of  the  trust.  It  shall  provide  for  regular 
and  special  meetings,  and  at  all  times  be  subject  to  the  control 
of  the  trustees  in  annual  or  special  meetings  assembled,  and 
shall  comply  with  all  by-laws  and  resolutions  adopted  thereby. 

The  following  persons  shall  constitute  the  first  board  of 
directors,  as  though  duly  elected  at  an  annual  meeting  of  the 
trustees,  namely;  C.  R.  Bramblet,  G.  h.  Faulhaber,  Samuel 
Niccolls,  F.  C.  Shryock,  J.  B.  Murphy. 

Their  terms  of  office  shall  expire  on  the  election  by  the  trus- 
tees, at  their  first  meeting,  and  the  qualifications  of  their  suc- 
cessors ;  but  in  no  event  shall  their  terms  last  beyond  the 
time  set  herein  for  the  first  annual  meeting  of  the  trustees. 

Vacancies  in  the  membership  of  the  board  of  directors 
from  any  cause  may  be  filled  from  among  the  persons  eligible, 
for  the  unexpired  term,  by  the  remaining  directors  or  a  major- 
ity thereof. 

Title  to  Real  Estate  and  Other  Property. 

16.  The  directors  may  have,  hold,  own,  manage,  dispose 
of  real,  personal  and  mixed  property  in  furtherance  of  any 
of  the  objects  and  powers  of  this  trust,  and  if  deemed  ad- 
visable, may  direct  that  a  committee  of  directors  or  other 
competent  trustees  receive  and  hold  the  title  to  any  such  real 
estate,  but  such  deed  thereto  shall  recite  that  the  title  thereto 
is  held  by  the  grantees  for  the  use  and  benefits  of  the  Great 
American  Home  Savings  Institution.  Neither  said  institution 
nor  any  person  as  trustee  for  its  use  and  benefit  shall  hold 
the  title  to  any  real  estate  for  its  use  for  a  longer  period  than 


5i6  Trusts  for  Business  Purposes. 

twenty  years  from  the  date  such  use  begins,  and  within  such 
period  any  such  real  estate  shall  be  sold.  It  is  expressly  de- 
clared that  it  is  not  the  intention  or  purpose  of  this  trust  to 
invest  its  funds  in  real  estate  further  than  may  be  necessary 
for  the  use  of  the  trustees  or  directors  in  conducting  its  busi- 
ness, or  to  protect  the  assets  of  this  institution. 

DiRKCToRs — Notice;  of  Election — Effect. 

17.  Upon  the  election  and  qualifications  of  a  new  director 
or  directors,  by  either  the  trustees  or  directors,  it  shall  be 
the  duty  of  the  president  and  secretary  to  execute  a  certificate 
of  the  fact  and  acknowledge  same  so  as  to  entitle  same  to 
be  received  of  record. 

The  qualification  of  a  successor  director  shall  have  the  ef- 
fect of  transferring  to  such  successor  all  of  the  rights  and 
title  of  his  predecessor. 

It  shall  be  the  duty  of  any  retiring  director  to  execute  any 
instrument  of  writing  necessary  or  proper  to  divest  himself 
of  all  right  or  title,  as  such  director,  in  any  and  all  of  the 
assets  of  the  trust,  so  as  to  fully  clear  the  title  thereto  and  vest 
same  in  his  successor  or  in  the  proper  holder  or  holders 
thereof. 

Effect, 

18.  This  instrument  and  any  amendment  thereof,  and  any 
certificate  of  a  fact  pertaining  to  the  trust,  or  any  of  its  assets 
or  funds,  when  executed  as  herein  required,  acknowledged 
and  recorded  in  the  office  of  a  recorder  of  deeds,  shall  impart 
notice  to  all  persons  of  its  contents,  and  all  persons  shall  be 
entitled  to  rely  on  its  provisions  and  of  any  amendments 
thereof,  and  any  recital  of  fact  contained  therein. 


Appendix.  517 

Te;rmination  of  Trust. 

19.  This  agreement  and  declaration  of  trust  shall  continue 
until  the  owners  of  seventy-five  (75%)  per  cent  of  the  issued 
and  outstanding  units  of  trustee  certificates  shall,  by  resolu- 
tion adopted  at  any  annual  meeting  or  special  meeting  called 
and  held  as  herein  required,  direct  the  directors  to  wind  up 
the  affairs  of  this  trust  at  the  expiration  of  such  period  of 
time  thereafter  as  may  be  necessary  to  enable  them  or  their 
successors  in  office  to  carry  out  and  fulfill  all  of  the  contracts, 
certificates  and  other  obligations  then  in  force,  or  thereafter 
contracted ;  provided  that  no  contract  shall  be  made,  certificate 
issued  or  obligations  assumed  after  the  date  of  the  adoption 
of  such  resolution  which  is  not  to  be  fully  matured  within 
a  period  of  twenty-one  years.  At  the  termination  of  this 
trust  as  above  provided,  the  directors  then  in  office  shall  be- 
come trustees  for  the  purpose  of  winding  up  the  affairs  of 
the  institution,  converting  its  assets  into  cash  and  distributing 
same  in  a  fair  and  equitable  manner.  They  shall  first  pay  all 
proper  costs  and  expenses  of  closing  up  the  business,  including 
their  reasonable  charges  in  that  behalf ;  second,  they  shall  pay 
all  general  claims  and  distribute  the  balance  of  said  trust  fund 
pro  rata  and  in  proper  proportions  among  the  holder  or  hold- 
ers of  said  trustee  certificates  as  they  may  appear  entitled 
thereto  under  the  terms  of  this  agreement. 

AmEndmi;nt. 

20.  This  agreement  and  declaration  of  trust  may  be 
amended  at  any  annual  or  special  meeting  of  the  trustees, 
called  and  held  as  herein  provided  by  the  affirmative  vote  of 
a  majority  of  the  issued  and  outstanding  trustees'  certificates, 
cast  as  this  instrument  provides ;  provided  that  no  such  amend- 


5i8  Trusts  for  Business  Purposes. 

merit  shall  deprive  any  depositor  or  other  class  of  certificate 
holders  of  any  of  their  rights. 

Change  of  Other  Laws. 

21.  The  trustees  may  on  the  affirmative  vote  of  two-thirds 
of  the  issued  and  outstanding  units  entitled  to  vote  hereunder, 
by  resolution  direct  the  board  of  directors  to  accept  the  bene- 
fits of  any  law  or  laws  of  the  State  of  Missouri,  which  may 
authorize  the  accumulation  of  a  fund  or  funds,  the  accumu- 
lation of  which  is  now  contemplated  under  the  terms  of  said 
Section  3431a  R.  S.  Mo.,  1909,  and  to  do  all  things  neces- 
sary to  bring  the  assets  under  the  provisions  of  any  such  law ; 
provided  that  no  such  readjustment  or  change  shall  deprive 
any  non-voting  certificate  holder  of  his  or  her  rights  here- 
under. 

Execution  of  Trust  Agreement. 

22.  This  agreement  and  declaration  of  trust  shall  become 
fully  effective  upon  the  signing  hereof  by  the  parties  named 
as  trustees  hereunder.  Persons  accepted  as  trustees  as  herein 
provided  for  and  to  whom  a  trustee  certificate  is  issued  orig- 
inally or  by  transfer  of  record,  shall  be  held,  deemed  and 
taken,  to  be  parties  to  this  agreement  and  declaration  of  trust 
as  fully  as  if  they  had  actually  executed  this  instrument  as  a 
party  hereto.  The  secretary  shall  certify  the  name  of  each 
such  trustee  certificate  holder  to  the  Supervisor  of  Building 
and  Loan  Associations  of  the  State  of  Missouri  if  requested 
by  said  supervisor. 

This  agreement  and  declaration  of  trust  shall  be  executed 
by  the  present  parties  hereto  in  duplicate,  one  copy  to  be  re- 
tained and  copied  of  record  by  the  secretary  in  the  minutes 


Appendix.  519 

of  the  directors,  and  the  other  copy  to  be  filed  with  the  Super- 
visor of  Building  and  Loan  Associations  at  Jefferson  City, 
Missouri. 

This  instrument  is  a  re-execution  of  the  agreement  of  Oc- 
tober 27th,  1920,  for  the  purpose  of  making  corrections  and 
changes  therein. 

In  Witness  Whereof  the  parties  herein  named  have  here- 
unto set  their  names  to  duphcate  copies  hereof  as  of  the  date 
herein  first  above  written. 

C.  R.  Bramblet, 
G.  L.  Faulhaber, 
F.  C.  Shryock, 
By         H.  S.  Bridgewater, 

Atty.  in  Fact; 
R.  L.  Gurney, 
Samuel  Niccolls, 
J.  B.  Murphy, 
By         H.  S.  Bridgewater, 

Atty.  in  Fact ; 
H.  H.  Scheer. 


520  Trusts  for  Business  Purposes. 

DENVER  TOWNSITE  COMPANY. 

This  trust  was  adjudicated  in  the  Idaho  Supreme 
Court  in  the  case  of  A.  T.  Spotswood  et  al.,  Respts.,  v. 
J.  B.  Morris,  Admrx.,  etc.,  of  Benjamin  F.  Morris,  De- 
ceased, et  al.,  Appts.  12  Idaho  360;  85  Pac.  1094;  6  L.  R. 
A.    (N.  S.)   665.     Trust  Instrument  is  as  follows: 

"This  Instrument,  made  this  i8th  day  of  September,  1895, 
Witnesseth,  that  whereas,  Benjamin  F.  Morris  was  the  owner 
of  the  following  lands  in  Idaho  county,  Idaho,  to  wit:  (Here 
follows  a  description  of  said  2,720.80  acres)  *  *  *  And 
he  agreed  with  the  following  persons,  to  wit :  Henry  Dernliam 
and  William  Kaufifman,  of  Moscow,  Idaho,  John  P.  \^ollmer 
and  Robert  Schleicher,  of  IvCwiston,  Idaho,  and  Wallace  Scott, 
of  Mt.  Idaho,  Idaho,  to  join  them  in  a  syndicate  to  purchase 
said  lands  of  him  and  resell  the  same  and  divide  the  profits 
thereof,  in  which  syndicate  each  of  said  persons  shotild  take 
and  pay  for  a  one-eighth  share  and  be  the  owner  of  and  entitled 
to  a  like  portion  of  the  profits  thereof,  and  said  Benjamin  F. 
Morris  should  take  and  pay  for  a  three-eighths  share,  and  be  the 
owner  of  and  entitled  to  a  like  portion  of  the  profits  thereof 
*  *  *.  And  whereas,  said  Benjamin  F.  Morris  has  by  deed  of 
even  date  herewith  conveyed  to  Robert  Schleicher  in  trust  for 
this  syndicate  according  to  these  articles  of  agreement  said 
2,720.80  acres,  all  except  the  160  acres  last  above  described, 
subject  to  a  mortgage  on  which  there  is  due  of  principal  $9,000 
besides  interest,  and  to  the  payment  by  the  syndicate,  including 
Benjamin  F.  Morris,  of  $4,320.00  of  the  purchase  money,  with 
interest  thereon  from  the  ist  day  of  May,  1895,  at  the  rate  of 
10  per  centum  per  annum  until  paid :  Now,  therefore,  in  order 
to  facilitate  the  accomplishment  of  the  purposes  of  said  syndi- 
cate, we,  the  said  parties,  hereby  organize  ourselves   into  an 


Appe;ndix.  521 

association,  and  agree  as  follows:  (i)  That  the  name  of  said 
association  shall  be  the  Denver  Townsite  Company,  and  the 
principal  office  of  said  association  shall  be  at  Lewiston,  Idaho. 
(2)  That  the  members  of  the  association,  and  their  executors, 
administrators,  heirs  and  assigns,  shall,  in  proportion  to  their 
interests  therein,  pay  the  obligations  thereof,  and  share  in  the 
profits  thereof.  (3)  That  the  title  to  said  lands  is  to  be  subject 
to  all  the  terms  and  provisions,  powers  and  trusts,  of  these  ar- 
ticles of  agreement  and  the  amendments  and  alterations  thereof 
which  may  be  made  from  time  to  time.  (4)  That  this  associa- 
tion shall  not  be  dissolved,  or  any  of  the  powers  herein  given, 
or  which  may  be  given,  be  revoked  by  any  transfer  at  any  time 
of  the  interest  of  any  member  thereof,  or  any  part  thereof, 
whether  by  act  of  the  party,  or  by  operation  of  law,  or  by  the 
death  of  any  member  or  members  thereof,  or  their  successor  or 
successors,  at  any  time.  (5)  That,  in  order  to  maintain  and 
continue  this  association,  no  member  or  members,  or  successor 
or  successors,  thereof  shall  for  five  years  from  date  hereof  liave 
any  right  or  partition  of  said  lands  or  any  of  them,  but  shall 
have  such  right  thereafter.  These  articles  of  agreement  shall 
be  binding  upon  the  parties,  their  assigns  whether  by  act  of 
party  or  operation  of  law,  and  their  heirs,  devisees,  executors, 
and  administrators.  (6)  The  interests  of  the  members  of  this 
association  in  the  property  thereof  shall  be  represented  by  eight 
certificates,  which  shall  be  and  are  hereby  agreed  to  be  personal 
property.  The  members  have  only  a  right  to  the  avails  or  pro- 
ceeds of  said  property,  the  title  thereto,  both  legal  and  equitable, 
remaining  and  being  in  said  trustee,  his  successor  or  successors 
in  trust.  (Here  follows  a  form  of  a  shareholder's  certificate.) 
*  *  *  (8)  The  certificate  of  shares  in,  and  interests  of  mem- 
bers of  this  association  in,  its  property  can  only  be  transferred 
in  the  manner  prescribed  in  the  form  of  certificate  last  above 


522  Trusts  for  Business  Purposes. 

set  forth,  and  not  then  unless  all  obligations  of  the  assignor  to 
the  association  are  paid.  No  transfer  shall  be  made  for  five 
days  immediately  before  a  meeting  of  the  shareholders,  or  for 
five  days  immediately  before  the  time  when  a  dividend  is  pay- 
able. (9)  That  the  annual  meeting  of  the  shareholders  shall 
be  held  in  Lewiston,  Idaho,  at  the  office  of  First  National  Bank 
of  Lewiston,  Idaho,  on  the  second  Tuesday  of  May  each  year, 
at  2  o'clock  P.  M.  That  no  meeting  of  shareholders  shall  be 
competent  to  transact  business  unless  a  majority  in  interest  of 
the  shareholders  shall  be  represented;  but  less  than  a  majority 
may  adjourn  from  day  to  day  or  until  such  time  as  may  be 
deemed  proper.  That  at  such  annual  meeting  a  president,  vice 
president,  and  secretary  for  the  ensuing  year  shall  be  elected 
by  ballot",  to  sen-e  one  year,  until  their  successors  are  elected 
and  qualified.  Special  meetings  of  the  shareholders  may  be 
called  by  any  three  shareholders  by  notice  in  writing,  by  mail 
or  otherwise,  to  meet  at  Lewiston,  Idaho,  at  the  office  of  the 
First  National  Bank  of  Lewiston,  Idaho,  at  an  hour  to  be  desig- 
nated in  the  notice,  such  notice  to  be  mailed  or  served  not  less 
than  five  days  prior  to  date  of  meeting.  When  all  shareholders 
assemble  and  so  agree,  either  in  person  or  by  proxy  appointed  in 
writing,  a  special  meeting  may  be  held  without  any  notice. 
That  at  all  meetings  of  the  shareholders  each  shareholder  shall 
be  entitled  to  cast  one  vote  for  each  certificate  held  by  him. 
He  may  vote  in  person  or  by  proxy  appointed  in  writing.  The 
president  or  presiding  officer  may  vote  his  own  share  or  shares, 
but  shall  not  have  power,  in  addition  as  presiding  officer,  to 
decide  a  tie  vote.  The  secretary  shall  keep  a  record  of  each 
meeting.  (10)  That  a  majority  in  interest  of  tlie  shareholders 
of  this  association,  at  any  meeting  thereof,  shall  have  as  full 
and  ample  power  and  authority  to  do,  or  authorize  to  be  done, 
any  and  every  thing  of  every  nature  whatsoever,  as  an  indi- 


Appe;ndix,  523 

vidual  owner  of  said  lands  in  fee  simple  would  have,  provided 
only  that  they  cannot  issue,  or  authorize  the  issue  of,  any  nego- 
tiable instruments,  or  borrow  money,  except  to  renew,  or  ex- 
tend, or  take  up,  or  pay  off,  a  mortgage  or  vendor's  lien  on 
said  lands  or  some  part  thereof.  That  the  only  other  manner 
in  which  they  can  raise  money  (except  from  income  or  sale  of 
property)  is  by  levy  of  assessments  as  hereinafter  provided, 
upon  the  shareholders.  That  nothing  except  the  consent  of  all 
the  shareholders  shall  authorize  the  creation  of  any  personal 
liability  against  the  shareholders,  and  all  contracts  entered  into 
shall  be  limited  to  creating  a  liability  against  the  property  of 
the  association.  (11)  The  officers  of  tliis  association  shall  con- 
sist of  a  president,  vice  president,  and  secretary,  who  shall  be 
elected  by  the  shareholders,  and  shall  perform  the  duties  usu- 
ally appertaining  to  their  respective  officers,  except  that  the 
secretary  shall  perform,  also,  the  duties  usually  appertaining 
to  the  office  of  treasurer.  They  shall  hold  office  for  one  year 
and  until  their  successors  are  elected  and  qualified.  *  *  * 
No  person  shall  hold  any  of  those  offices  unless  he  be  a  share- 
holder, and  a  transfer  of  his  share  as  provided  in  these  articles 
of  agreement  shall  operate  as  a  resignation  by  him.  *  *  ♦ 
(12)  The  secretary  of  this  association  is  hereby  required,  au- 
thorized, and  empowered  to  sell,  contract  for  sale  of,  and  con- 
vey, by  such  form  of  conveyance  as  he  may  deem  best,  all  or 
any  part  of  the  lands,  or  lots,  or  blocks  contained  in  the  2,720.80 
acres  above  described,  for  such  price  or  prices,  and  upon  such 
terms,  at  public  or  private  sale,  as  he  may  deem  best,  subject  to 
the  directions  of  the  shareholders ;  and  no  purchaser  need  see 
to  the  application  of  the  purchase  money,  or  to  any  such  direc- 
tions of  the  shareholders,  or  to  the  qualifications  of  the  secre- 
tary as  such  officer.  He  shall  have  these  articles  of  agreement 
and  said  deed  to  him  recorded  in  Idaho  county.    The  secretary 


524  Trusts  for  Business  Purposes. 

shall  also  have  power  to  sell  all  products  which  may  be  received 
from  any  of  said  lands  when  and  for  such  prices  and  on  such 
terms  as  he  may  deem  best.    He  may,  out  of  any  money  in  his  | 

hands  as  secretary  or  treasurer,  pay  the  taxes  on  said  lands, 
insurance  premiums  on  any  property  of  the  association,  or  any 
property  on  which  it  may  have  an  encumbrance,  and  interest  on 
any  encumbrance  or  encumbrances  on  said  lands  or  any  part 
thereof,  also  all  necessary  repairs  at  the  wells,  or  of  fences  or 
other  property  on  said  lands,  and  all  expenses  incident  to  con- 
struction of  fences,  made  necessary  by  any  changes  in  roads. 
He  may  take  any  action  he  may  deem  most  for  the  interest  of 
the  association  in  the  matter  of  any  actions  or  proceedings  of 
the  county  commissioners  concerning  roads.  The  secretary 
shall  incur  no  obligations  which  shall  altogether  exceed  $500. 
without  additional  authority.  He  may  deposit  any  money  on 
hand  in  his  name  as  treasurer  of  Denver  Townsite  Company  in 
any  national  bank  and  check  out  the  same.  He  may  procure 
such  record  books  and  stationery  and  blanks,  from  time  to  time, 
as  may  be  necessary.  He  shall  keep  an  account  and  record  of 
the  affairs  of  the  company,  and  render  accounts  and  reports  at 
the  annual  meetings,  and  record  the  same  in  the  record  book  of 
such  meetings,  and,  whenever  requested  by  vote  at  any  meeting, 
render  accounts  and  pay  over  any  money  due  the  Denver  Town- 
site  Company." 


Appendix.  525 

OAKALA  FOOD  ASSOCIATION. 

Published  by  permission  of  John   Stelk,  former   Judge  of 
Chicago,  Illinois,  who  is  the  Author  of  the  following  Trust: 

The  Parties  to  the  Trust. 

1.  This  Agreement  and  Declaration  of  Trust  made  this  ist 
day  of  November,  A.  D.  1922,  by  and  between  Sumiy  South 
Developing  Company,  Inc.,  a  corporation  organized  and  exist- 
ing under  the  laws  of  the  State  of  Alabama,  of  Oak,  Alabama, 
for  itself  and  its  assigns,  and  John  Steek,  Albert  W.  Keller, 
and  Viola  Stelk,  for  themselves  and  their  successors,  herein 
designated  as  Trustees,  witnesseth,  that: 

Intention. 

2.  Whereas,  the  Sunny  South  Developing  Company,  Inc. 
desires  to  create  an  express  trust  to  be  known  as  the  Oakala 
Food  Association  for  the  purpose  of  conducting  any  or  all 
of  the  business  hereinafter  more  specifically  set  forth,  and, 

Whereas,  it  is  possessed  of  property  which  it  desires  shall 
be  used  in  the  conduct  of  such  business ;  and 

Whereas,  it  desires  to  transfer,  and  convey  such  property  to 
the  Trustees  herein  as  a  Trust  Estate  to  be  used  by  said  Trus- 
tees, and  their  successors,  in  the  conduct  of  said  business ;  and 

Whereas,  the  Trustees  desire  to  accept  such  property  and 
hold  and  manage  and  dispose  of  the  same  in  accordance  with 
the  agreements  and  covenants  herein  contained,  and  for  the  uses 
and  purposes  herein  set  forth : 

Declaration  of  Trust, 

3.  Now,  Therefore,  in  consideration  of  the  premises  and 


526  Trusts  ifor  Business  Purposes. 

the   mutual    covenants   hereinafter    contained,    it   is    mutually 
agreed  as  follows : 

(a)  The  said  Sunny  South  Developing  Co.  Inc.  hereby  con- 
veys, grants,  bargains,  sells,  transfers,  assigns  and  delivers  to 
the  Trustees  the  following  described  land  situated  in  the  County 
of  Baldwin  and  State  of  Alabama,  to-wit:  The  southeast 
quarter  of  Section  Twenty  (20),  Township  eight  (8)  North, 
Range  four  (4),  East  of  St.  Stephen's  Principal  Meridian,  re- 
ceipt of  which  is  hereby  acknowledged  by  the  Trustees. 

(b)  It  is  agreed  that  the  land  hereby  conveyed  to  the  Trus- 
tees, and  all  cash,  securities  and  other  property  hereafter  ac- 
quired by  them  as  such  Trustees,  together  with  the  proceeds, 
incomes,  profits,  increases  and  surplus  thereof  shall  be  and  be- 
come and  constitute  a  Trust  Estate,  to  be  held,  controlled,  man- 
aged and  disposed  of  by  the  Trustees  under  the  designation  of 
(3akala  Food  Association,  for  the  benefit  of  the  holders,  from 
time  to  time,  of  beneficial  interests  in  said  Trust  Estate,  some- 
times hereinafter  called  "beneficiaries"  and  "beneficial  inter- 
ests," in  accordance  with  the  agreements  and  covenrints  herein 
contained  and  for  the  uses  and  purposes  herein  set  forth. 

Express  Trust  Created. 

4.  It  is  hereby  expressly  declared  that  an  express  trust  and 
not  a  tenancy  in  common,  association  or  ^partnership  is  hereby 
created,  and  that  neither  the  trustees  nor  the  holders  of  benefi- 
cial interests  shall  ever  be  liable  hereunder  as  partners,  asso- 
ciates or  otherwise.  Plolders  of  Beneficial  Interests  shall  have 
no  right  and  no  voice  whatever,  as  such,  in  the  management  of 
the  Trust  Estate  except  as  hereinafter  provided. 

In  Case  Estate  is  Without  Trustees. 

5.  If,  at  any  time,  for  any  reason,  this  Trust  Estate  shall 


Appendix.  5^7 

be  left  without  a  trustee,  then  trustees  may  be  appointed  by  any 
court  of  competent  jurisdiction,  upon  application  by  one  or 
more  of  the  Holders  of  Beneficial  Interests  hereunder.  The 
Holders  of  Beneficial  Interests  hereunder  shall  at  no  time  have 
any  voice  in  the  selection  of  trustees  hereunder,  except  through 
the  medium  of  some  court  of  competent  jurisdiction,  in  the 
manner  and  under  the  circumstances  aforesaid. 

Number  of  Trustees. 

6.  The  trustees  shall  be  three  (3)  in  number  and  shall  in 
all  cases  hold  their  ofBce  until  their  successors  have  been  elected 
and  shall  have  qualified  and  accepted  the  trust ;  provided,  that 
the  number  of  trustees  may  be  increased  or  diminished  at  any 
time  by  the  unanimous  vote  and  decision  of  all  of  the  said  trus- 
tees; and  the  said  trustees,  by  such  unanimous  vote  and  de- 
cision, shall  have  the  right  to  designate  in  writing  the  trustee  or 
trustees  who  shall  retire  upon  any  decrease  in  the  number,  and 
also  to  designate  in  writing  the  trustee  or  trustees  who  shall  act 
as  such  upon  any  increase  in  the  number  thereof. 

Eeection  of  Trustees. 

7.  John  Stelk,  subject  to  the  provisions  hereof,  sliall  act  as 
trustee  for  three  years;  Albert  W.  Keller  for  two  years,  and 
Viola  Stelk  for  one  year.  When  the  one  year  trusteeship  of 
Viola  Stelk  expires,  the  remaining  trustees  shall  elect  her  suc- 
cessor for  a  period  of  three  years.  When  the  term  of  Albert 
W.  Keller  as  trustee  expires,  the  then  remaining  trustees  shall 
elect  his  successor  for  a  period  of  three  years,  and  when  the 
term  of  John  Stelk  expires,  as  trustee,  the  then  remaining  trus- 
tees shall  elect  his  successor  for  a  period  of  three  years.  There- 
after, and  yearly,  the  successor  to  the  retiring  trustee  shall  be 


528  Trusts  for  Business  Purposes. 

elected  by  the  remaining  trustees.  If  there  is  any  increase  at 
any  time  in  the  number  of  trustees,  the  terms  of  such  trustee 
or  trustees  shall  be  so  made  that  there  shall  be  a  yearly  retiring 
and  a  yearly  election  of  a  trustee  or  trustees  by  the  remaining 
trustees ;  but  this  provision  shall  not  be  construed  to  mean  that 
a  trustee  may  not  be  elected  to  succeed  herself  or  himself. 

Vacancies  of  Trustees. 

8.  In  case  of  the  death,  removal,  resignation,  unwillingness, 
or  inability  to  act  of  one  or  more  of  the  trustees,  and  a  vacancy 
or  vacancies  shall  thereby  be  caused,  the  remaining  trustees  shall 
elect  a  new  trustee  or  trustees  to  fill  such  vacancy  or  vacancies. 
Upon  the  election  and  qualifications  of  a  Trustee  under  the 
provisions  of  this  instrument,  the  certificate  of  such  election 
and  qualification  shall  be  signed  by  all  the  trustees  and  acknowl- 
edged by  them  in  the  manner  and  form  that  instruments  of  con- 
veyances are  required  to  be  acknowledged  by  the  laws  of  the 
State  of  Alabama,  and  shall  be  deposited  with  the  Depository 
appointed  by  the  trustees.  Upon  the  election  of  any  trustee, 
such  person  shall  qualify  by  executing  an  acceptance  of  this 
Trust,  which  shall  within  ten  days  after  such  election,  be  de- 
posited with  the  Depository  of  the  Trustees.  If  the  acceptance 
is  not  so  deposited,  the  office  shall  be  considered  vacant  and  a 
new  election  shall  be  made.  As  soon  as  any  trustee  elected  to 
fill  a  vacancy  shall  have  qualified,  the  trust  estate  and  the  title 
thereto  shall  rest  in  the  new  trustee  and  the  old  trustees  with- 
out any  further  act  or  conveyance.  Until  such  vacancy  is 
filled,  the  remaining  trustee  or  trustees  shall  have  all  the  title 
and  shall  act  and  have  all  powers  of  all  the  trustees  hereunder. 
^'\Tlere  there  are  five  or  more  trustees  in  office,  each  trustee  shall 
be  subject  to  removal  at  any  time,  with  or  without  cause,  by 


Appendix.  529 

the  unanimous  vote  of  all  the  remaining  Trustees  at  a  meeting 
of  the  Trustees  duly  held  of  which  all  the  Trustees  had  at  least 
three  days  prior  notice. 

The  Business  oe  the  Association. 

9.  The  Trustees  shall  have  the  power,  under  the  designa- 
tion of  Oakala  Food  Association,  to  use  the  Trust  Estate 
for  the  following  purposes : 

A.  To  engage  in  and  carry  on  the  business  of  :  building  and 
operating  a  canning  and  dehydration  plant ;  an  ice  making,  elec- 
tric light,  heat  and  water  plant;  cold  storage  and  other  ware- 
houses, a  potato  curing  house,  pickeling  vats  and  other  facilities 
for  the  proper  handling  of  meats,  turtles,  crabs,  fish,  oysters, 
shrimps,  poultry,  milk,  eggs,  butter,  cheese  and  all  sorts  of 
fruits  and  vegetables;  acquiring,  establishing  and  operating 
wholesale  and  retail  stores,  clubs  or  places  where  such  products 
can  be  sold;  purchasing,  selling,  trading  and  dealing  in  trees, 
plants,  seeds,  fertilizers,  sprays,  farm  and  orchard  machinery, 
tools  and  equipment  live  stock,  feed,  poultry  and  bees ;  teaching 
farmers  and  orchardists  how  to  prepare,  plant  and  cultivate 
their  orchards,  and  farms,  how  to  care  for  the  live  stock  and 
poultry  thereon,  and  how  to  harvest  and  dispose  of  the  income 
and  increase  thereof ;  guaranteeing  from  time  to  time,  a  net 
minimum  price  for  the  farm  and  orchard  products  as  will  as- 
sure the  farmer  a  fair  profit  over  and  above  all  legitimate  ex- 
penses, provided,  the  crop  is  planted,  cultivated  and  harvested 
according  to  instructions  from,  and  under  the  directions  of  the 
trustees,  under  a  contract  with  the  trustees  for  a  fixed  number 
of  years,  and,  provided  further,  that  the  trustees  are  under 
such  contract,  permitted  to  market  the  products  and  are  al- 
lowed a  certain  percentage  of  the  amount  that  may  be  obtained 


530  Trusts  J'or  Busine;ss  Purposes. 

by  them  over  and  above  such  guaranteed  price  in  the  nature 
of  a  premium;  inaugurating  a  system  of  fast  water,  truck  and 
rail  transportation  facilities  between  Oak  and  Mobile,  Alabama, 
and  between  Oak  and  Pensacola,  Florida,  and  between  Oak  and 
other  points  and  obtain  an  extension  of  the  Bay  Minette,  Foley 
and  Fort  Morgan  Railroad  from  Foley  to  Oak,  Alabama,  or 
its  vicinity ;  manufacturing  bags,  boxes,  crateS;  hampers,  bas- 
kets and  other  containers  for  the  shipment  of  all  products,  an-l 
finding  markets  for  such  products  and  buying,  selling  and  trad- 
ing therein ;  establishing  and  conducting  a  state  or  national  bank 
and  a  telephone  system. 

B.  To  engage  in  and  carry  on  any  other  necessary  and  in- 
cidental business  in  connection  with  the  foregoing  which  is  cal- 
culated directly  or  indirectly  to  increase  or  enhance  the  value 
of  the  Trust  Estate. 

C.  To  buy,  sell,  acquire,  own,  mortgage,  encumber,  lease, 
manage,  exchange,  dispose  of,  and  deal  in  the  good-will,  fran- 
chise, property,  stocks,  securities,  beneficial  interests,  and  shares 
of  corporations,  trusts  and  associations  engaged  in  whole  or  in 
part  in  any  business  similar  to  any  business  above  mentioned. 

D.  To  buy,  sell,  license,  acquire,  own,  mortgage,  encumber, 
lease,  manage,  exchange,  dispose  of,  and  deal  in  franchises,  con- 
tracts, concessions,  leases,  real  estate,  patents,  patent  rights, 
trade  names,  trade  marks,  copyrights,  and  any  and  all  property 
of  whatsoever  nature,  real,  personal,  or  mixed,  tangible  or  in- 
tangible, in  any  way  believed  by  the  Trustees  to  be  valuable, 
necessary  or  incidental  in  connection  with  the  carrying  on  of 
any  business  above  mentioned. 

E.  To  do  all  and  every  act  and  thing  necessary  or  incidental 
in  connection  with  the  carrying  on  of  any  business  above 
mentioned. 


Appendix.  531 

Powers  of  Trustees. 

10.  In  connection  with  the  carrying  on  of  any  business 
above  mentioned: 

(a)  The  Trustees  shall  hold  the  legal  title  to  the  Trust  Es- 
tate, and  have  the  absolute  control,  management  and  disposition 
of  the  same  and  the  absolute  control  and  management  of  any 
and  all  business  engaged  in,  to  the  same  extent  as  natural  per- 
sons might  or  could  do,  in  any  state  and  in  any  part  of  the 
world,  as  principals,  agents,  contractors,  employers,  employees, 
trustees,  partners  or  otherwise. 

(b)  The  Trustees  shall  have  power  to  enter  into,  make, 
execute,  and  perform  contracts,  agreements,  leases,  obligations, 
and  undertakings  of  every  kind  and  nature  with  any  person, 
persons,  firm,  organization,  private  or  public  corporation,  quasi- 
public  corporation  and  other  body  or  individual. 

(c)  The  Trustees  shall  have  power  to  draw,  make,  accept, 
endorse,  execute,  pay,  buy,  sell  and  discount  promissory  notes, 
drafts,  bills  of  exchange,  bonds,  warrants,  debentures,  and  any 
and  all  other  negotiable  or  non-negotiable  evidences  of  indebted- 
ness of  whatsoever  nature. 

Additional  Powers  of  Trustees. 

11.  The  Trustees  shall  have  full  power  to  invest  and  re- 
invest, mortgage,  sell,  pledge  and  incumber  the  Trust  Estate 
and  its  profits,  income,  increase,  surplus  and  avails ;  to  bring, 
defend  or  compromise  any  action  or  suit  at  law  or  in  equity,  to 
pay,  settle,  compromise,  satisfy  and  collect  judgments  and  de- 
crees of  whatsoever  nature,  and  to  engage  and  employ  counsel 
for  any  and  all  such  purposes. 


532  Trusts  for  Business  Purpose;s. 

Delegation  of  Powers  of  Trustees. 

12.  Any  Trustee  may,  by  written  proxy  or  power  of  at- 
torney, delegate  his  power  as  such  for  a  period  not  to  exceed 
thirty  days  at  any  one  time,  to  any  other  Trustee,  including  the 
right  to  vote  at  all  meetings  of  the  Trustees,  but  not  including 
the  right  to  vote  on  a  motion  to  remove  a  Trustee,  or  to  make, 
amend,  adopt  or  repeal  any  by-law. 

Meeting  of  Trustees. 

13.  The  Trustees  shall  meet  at  such  times  and  places  as  they 
may  fix  from  time  to  time  by  by-law  or  resolution.  A  record 
shall  be  made  and  kept  of  the  business  transactions  at  each 
meeting.  The  minutes  of  any  meeting  of  the  Trustees  shall,  as 
to  any  fact  which  they  purport  to  state,  be  prima  facie  true, 
upon  all  questions  of  title  depending  in  whole  or  in  part  there- 
upon or  effecting  the  rights  of  third  persons. 

Quorum  of  Trustees. 

14.  Any  three  trustees  present  in  person  or  by  proxy  and 
not  less  than  three  shall  constitute  a  quorum.  At  a  meeting  of 
the  Trustees,  the  concurrence  of  all  of  the  Trustees  present  or 
represented  at  the  meeting  shall  not  (except  as  otherwise  herein 
provided)  be  necessary  to  the  validity  of  any  action  taken  by 
them;  but  the  decision  expressed  by  the  vote  of  a  majority  of 
the  Trustees  shall  be  conclusive  and  binding. 

Special  Meetings. 

15.  Special  meetings  of  the  Trustees,  in  addition  to  those 
provided  for  in  the  by-laws  shall  be  held  from  time  to  time 
upon  a  call  of  the  Trustees,  or  a  majority  of  them. 


Appendix.  533 

By-laws  and  Rules. 

16.  The  Trustees  may,  at  any  meeting  at  which  all  of  the 
Trustees  are  present,  make,  adopt,  amend  or  repeal  such  by- 
laws and  rules  not  inconsistent  with  the  terms  of  this  instru- 
ment as  they  may  deem  necessary  or  desirable  for  the  conduct 
of  their  business  or  for  the  government  of  themselves,  their 
officers,  agents  and  servants. 

Agents  and  Employes. 

17.  The  Trustees  shall  have  the  power  to  employ  such  help, 
including  attorneys  and  solicitors,  as  they  may  from  time  to 
time  deem  necessary  or  expedient.  The  Trustees  shall  agree 
with  said  help  as  to  the  amount  of  compensation  to  be  paid; 
and  they  may  likewise  pay  to  themselves  such  compensation 
for  their  own  services  as  trustees  or  officers  as  they  may  deem 
reasonable  and  fair. 

Ofeicers  and  Servants. 

18.  The  Trustees  shall  annually  elect  from  their  number  a 
President,  and  in  their  discretion,  a  Vice-President.  They  shall 
also  annually  elect  a  Secretary  and  a  Treasurer.  The  office  of 
Secretary  and  Treasurer  may  be  held  by  one  and  the  same 
person,  and  any  person  or  persons  elected  to  such  office  or 
offices  need  not  be  a  Trustee.  The  Trustees  shall  have  authority 
to  elect  temporary  officers  to  serve  during  the  absence  of  or 
disability  of*  regular  officers  and  have  full  authority  to  appoint 
and  remove  officers,  agents,  managers,  employees,  clerks  and 
counsel,  with  or  without  cause. 

Duties  of  Officers. 

19.  The  President  shall  preside  at  all  meetings  of  the  Trus- 


534  Trusts  for  Business  Purposes. 

tees,  and  shall  perform  such  other  duties  as  the  by-laws  or  the 
Trustees  may  prescribe  and  require.  The  Vice-President  shall 
perform  the  duties  of  the  President  in  his  absence;  and  shall 
perform  such  other  duties  as  the  by-laws  or  the  Trustees  shall 
prescribe  or  require.  The  Secretary  shall  attend  all  meetings 
of  the  Trustees,  keep  minutes  of  such  meetings,  keep  such  rec- 
ords and  books  and  render  such  services  as  may  be  prescribed 
by  the  by-laws  or  imposed  upon  him  or  her  from  time  to  time 
by  the  IVustees.  The  certificate  of  the  Secretary  of  the  correct- 
ness of  any  copy  or  of  any  record  in  the  Secretary's  office  shall 
be  prima  facie  evidence.  The  Treasurer  shall  perform  the 
duties  usually  incident  to  such  position,  and  such  as  may  be 
prescribed  by  the  by-laws  or  required  from  time  to  time  by 
the  Trustees. 

The  Trustees  shall  constitute  as  their  depository  the  Treas- 
urer of  the  Trustees,  who,  as  such,  shall  be  tendered  a  copy  of 
any  instrument  hereinafter  designated. 

Duties  oe  Depository. 

20.  Such  Depository  shall  have  the  custody  of  one  of  the 
originals  of  the  Declaration  of  Trust  and  of  any  and  all  instru- 
ments altering  or  adding  to  the  same,  or  containing  the  resigna- 
tion of  one  or  more  Trustees,  or  showing  the  election  of  one  or 
more  persons  to  be  Trustees  to  fill  vacancies,  or  otherwise  af- 
fecting this  Declaration  of  Trust  or  the  duties,  powers  or  lia- 
bilities of  the  Trustees.  Such  Depository  shall  give  good  and 
sufficient  bonds  for  the  safekeeping  and  return  of  all  moneys, 
papers  or  property  entrusted  to  his  or  her  care  either  as  de- 
pository or  as  treasurer.  Such  depository  shall  be  bound  to 
deliver,  on  demand,  to  any  new  depository  selected  by  the 
Trustees  all  such  documents  and  records. 


Appendix.  535 

Evidknce  of  Acts  of  Trustees. 

21.  For  purposes  of  convenience,  the  trustees  may  select 
one  or  more  of  their  number  to  act  for  and  in  behalf  of  all  of 
the  Trustees  respecting  any  given  matter  as  respecting  any 
given  class  of  matters.  All  action  of  the  Trustees,  or  other 
exercise  by  them  of  powers  hereby  conferred,  except,  the  exe- 
cution of  written  instruments  signed  by  all  of  the  Trustees  then 
acting,  shall  be  by  officer,  agent,  manager,  attorney  or  other 
representative  acting  under  the  authority  of  a  resolution  or 
by-law  passed  or  adopted  at  a  meeting  of  the  Trustees  duly 
called  and  held,  or  by  a  Trustee  or  Trustees  acting  under  such 
authority;  and  any  action  of  the  Trustee,  or  other  exercise  by 
them,  of  the  powers  hereby  conferred,  thru  an  officer,  agent, 
manager,  attorney  or  other  representative  thereunto  thus  au- 
thorized, or  by  a  Trustee  or  Trustees  thereunto  thus  duly  au- 
thorized, shall,  except  as  otherwise  provided  herein,  be  valid 
and  binding  upon  the  Trust  Estate  at  law  and  in  equity. 

Statements  by  Trustees  or  Officers. 

22.  So  far  as  strangers  to  this  trust  are  concerned,  a  state- 
ment in  writing  by  the  Trustees,  or  by  any  number  of  said  trus- 
tees, authorized  by  all  of  the  trustees- to  act  in  that  behalf,  di- 
recting a  particular  act  to  be  done,  shall  be  conclusive  evidence 
in  favor  of  such  strangers  that  such  act  is  within  the  power  of 
the  trustees  and  no  purchaser  or  purchasers  from  the  trustees, 
and  no  person  dealing  with  the  trustees,  shall  be  obliged  to  see 
to  the  application  of  any  purchase  money,  or  of  any  other  con- 
sideration paid,  or  delivered  by  or  for  said  purchaser  to  or  for 
said  trustees.  Copies  of  all  documents  and  records  in  the 
custody  of  Depository,  duly  certified,  and  certificates  as  to  who 
are  Trustees  or  the  Cestui  Que  Trusts,  or  the  like,  duly 


S3^  Trusts  for  Business  Purposes. 

signed  by  the  president,  and  attested  by  the  Secretary  or  Treas- 
urer shall  be  conclusive  evidence  as  against  the  Trust  Estate 
upon  the  matters  certified  to,  and  shall  have  all  the  effects  of 
the  original. 

Contracts  of  Trustees. 

23.  In  every  contract,  or  order,  or  obligation  which  the  trus- 
tees shall  give  or  enter  into,  they  shall  stipulate  and  such  stipu- 
lation shall  be  binding,  that  the  trustees  do  not  sign  said  docu- 
ment as  individuals  but  as  trustees,  and  shall  not  be  held  per- 
sonally liable  thereunder,  and  the  party  or  parties  dealing  with 
such  trustees  shall  be  obliged  to  look  to  the  trust  estate  for  the 
satisfaction  of  any  such  contract,  order  or  obligation.  The 
Trustees  shall  adopt  a  common  seal,  on  which  shall  be  impressed 
the  following:  "Oakala  Food  Association,  Oak.  Alabama, 
Trustees  Seal,"  and  use  or  cause  the  same  to  be  used,  in  attesta- 
tion of  such  instruments  as  to  them  may  seem  proper.  Said 
Trustees  shall  sign  all  documents  of  every  kind  as  follows : 
"Oakala  Food  Association,  by 


Trustees. 
Said  Trustees  hereby  sign  as  trustees,  and  not  as  individuals." 

No  Liability  for  Errors. 

24.  The  Trustees  shall  not  be  liable  for  errors  of  judgment 
either  in  holding  or  disposing  of  property  originally  conveyed 
to  them,  or  in  afterwards  acquiring  and  holding  or  disposing  of 
additional  property,  or  for  any  losses  arising  out  of  any  invest- 
ments; nor  shall  they  be  liable  for  any  act  or  for  any  failure 
to  act,  in  any  given  matter  in  the  execution  of  this  trust  in 


Appendix.  537 

good  faith;  nor  shall  they  be  liable  for  the  acts  and  omissions 
of  each  other,  or  of  any  servant  or  employee  and  they  shall  not 
be  required  to  give  bond  to  secure  the  performance  of  this  trust 
by  them.  Each  trustee,  however,  shall  be  liable  for  his  or  her 
own  wilful  and  corrupt  breach  of  trust  or  misconduct. 

Indemnity  to  Trustee. 

25.  Each  Trustee  shall  be  indemnified  by,  and  receive  re- 
imbursement from  the  Trust  Estate  against  any  and  all  personal 
liability,  claims,  damages,  or  loss  incurred  or  sufifered  by  him 
or  her  in  the  administration  of  the  Trust  Estate,  or  any  part 
or  parts  thereof,  or  in  doing  an  act  on  account  of  his  or  her 
being  a  Trustee,  except  such  liability,  claim,  damages,  or  loss 
as  may  result  from  his  or  her  personal  and  wilful  default. 

Different  Classes  of  Beneficial  Interests. 

26.  There  shall  be  issued  two  thousand  (2000)  preferred 
beneficial  interests,  to  be  known  as  Class  "A",  of  the  par  value 
of  Ten  ($10.00)  Dollars  each;  three  thousand  (3000)  common 
beneficial  interests,  to  be  known  as  Class  "B",  of  the  par  value 
of  Ten  ($10.00)  Dollars  each;  and  two  thousand  (2000)  pre- 
ferred beneficial  interests,  to  be  known  as  Class  "C",  of  the  par 
value  of  Ten  ($10.00)  Dollars  each.  With  each  beneficial  in- 
terest of  Class  "A",  there  shall  be  given  as  a  bonus  and  without 
any  cost  or  charge  whatsoever,  one  Class  "B"  beneficial  interest. 

Dividends  on  Beneficial  Interests. 

27.  Out  of  the  profits,  the  holders  of  the  preferred  benefi- 
cial interests,  known  as  Class  "A"  certificates,  shall  be  entitled 
to  receive  a  dividend  of  seven  per  cent  (7%)   per  annum  on 


538  Trusts  for  Business  Purposes. 

each  preferred  Class  "A"  beneficial  interest  before  any  divi- 
dends shall  be  paid  on  Class  "B"  and  Class  "C"  beneficial  in- 
terests. The  preference  on  Class  "A"  certificates  sliall  be 
cumulative,  dividends  shall  be  payable  quarterly.  The  holders 
of  the  common  beneficial  interests,  known  as  Class  "B"  certifi- 
cates, shall  be  entitled  to  receive,  after  the  payment  of  the  divi- 
dend on  the  beneficial  interests,  known  as  Class  "A",  a  dividend 
of  not  to  exceed  seven  per  cent  (7%)  per  annum,  on  each 
common  Class  "B"  beneficial  interest,  before  any  dividends 
shall  be  paid  on  the  Class  "C"  beneficial  interests. 

Additionai,  Earnings. 

28.  If,  after  the  payment  of  dividends  as  hereinabove  pro- 
vided, on  the  beneficial  interests,  known  as  Classes  "A"  and 
"B"  a  surplus  or  net  profit  remains,  the  trustees  may,  in  their 
discretion  declare  a  further  dividend,  payable  at  such  time  or 
times  as  they  may  deem  advisable,  which  said  dividend  shall  be 
distributed  among  holders  of  beneficial  interests  in  such  pro- 
portions as  the  trustees  may  determine. 

Special  Dividends. 

29.  The  holders  of  preferred  beneficial  interests,  repre- 
sented by  certificates  of  Class  "C"  shall  be  at  all  times  entitled 
to  a  discount  or  reduction  on  the  retail  price  on  the  purchases 
of  goods,  wares,  and  merchandise,  or  any  products  which  may 
be  oflfered  for  sale  by  the  trustees,  such  discount  or  reduction 
shall  be  fixed  from  time  to  time  by  the  trustees,  but  in  no  event 
shall  such  discount  or  reduction  of  said  retail  price  be  less  than 
5%  nor  more  than  20%  of  the  aggregate  amount  of  such  pur- 
chases, said  discount  or  reduction  to  be  payable  or  allowable  at 


Appendix.  539 

such  times  and  in  such  manner  as  may  be  determined  by  the 
trustees. 

Certificates  May  be  Called  in  for  Payment. 

30.  The  preferred  beneficial  interests,  known  as  Class  "A" 
and  Class  "C"  shall  be  callable  and  may  be  retired  at  any  time 
after  five  years  from  the  date  of  issue,  at  the  rate  of  $10.00  per 
beneficial  interest,  together  with  any  accumulations  of  divi- 
dends which  may  have  accrued  thereon. 

Certificates  Class  "A". 

31.  As  evidence  of  the  ownership  of  the  Class  "A"  pre- 
ferred beneficial  interests  hereunder,  the  trustees  shall  cause  to 
be  issued  to  each  Class  "A"  preferred  beneficial  holder  a  trans- 
ferable negotiable  certificate,  which  shall  be  substantially  in 
the  following  form. 

"Number      OAKALA  FOOD  ASSOCIATION       Beneficial 

General  Offices:    Oak,  Baldwin  Co.,  Ala.       Interests 

Par  value  An  Express  Trust  


$10.00  Class  "A" 

This  certifies  that is  the  holder  of 

Class  "A"  preferred  Beneficial  Interests 

in  Oakala  Food  Association,  of  the  par  value  of  Ten 
($10.00)  Dollars,  fully  paid  and  non-assessable,  subject  to  the 
Declaration  of  Trust,  creating  said  Association,  dated  Novem- 
ber 1st,  and  recorded  in  the  office  of  the  Judge  of  the  Probate 
Court  in  and  for  Baldwin  County,  Alabama,  at  Bay  ]N,Iinette,  the 
County  Seat,  and  transferrable  only  on  the  books  of  the  Trus- 
tees, in  person  or  by  attorney,  upon  surrender  of  this  certificate 
properly  endorsed. 

In  Witness  Whereof,  the  Trustees  have  issued  this  Cer- 
tificate on  this  day  of A.  D.  192 .. . 


Trustees." 


540  Trusts  for  Busine;ss  Purposes. 

Certificate  Class  "B". 

32.  As  evidence  of  the  ownership  of  Class  "B"  common 
beneficial  interests  hereunder,  the  Trustees  shall  cause  to  be 
issued  to  each  beneficial  holder  of  Class  "B"  certificates  a  trans- 
ferable negotiable  certificate,  which  shall  be  substantially  in 
the  form  provided  for  as  to  Class  "A"  excepting  to  cliange  the 
words  "preferred"  to  "common"  and  the  letter  "A"  to  "B". 

Certificate  Class  "C". 

;^^.  As  evidence  of  the  ownership  of  Class  "C"  preferred 
beneficial  interests  hereunder,  the  trustees  shall  cause  to  be  is- 
sued to  each  Class  "C"  preferred  beneficial  holder  a  transfer- 
able negotiable  certificate,  which  shall  be  substantially  in  the 
form  provided  for  as  to  Class  "A"  excepting  for  the  change 
of  the  letter  "A"  to  "C". 

Reverse  Side  of  Certificates. 

34.  On  the  reverse  side  of  said  Certificates  shall  appear  the 
following : 

"For  Value  Received.  ..  .hereby  sell,  assign  and  transfer 

unto Beneficial  Interests  described  in 

the  within  Certificate  and  do  hereby  irrevocably  constitute  and 

appoint Attorney  to  transfer  the  same  on  the 

books  of  the  within  named  Trust  with  full  power  of  substitu- 
tion in  the  premises. 

Dated 19 


In  presence  of 

In  addition  thereto  there  shall  be  endorsed  on  reverse  side  of 


Appendix.  541 

said  certificates  a  synopsis  of  paragraphs  2.'],  28,  29,  30,  40,  50 
to  55,  substantially,  as  follows: 

"Note.  Paragraphs  27,  28,  29  of  the  Declaration  of 
Trust  provide  that  Class  "A"  Certificates  shall  receive  at 
least  7%  cumulative  dividend  per  year  payable  quarterly. 
Class  "B"  shall  receive  7%,  such  a  dividend  as  the  trus- 
tees may  from  time  to  time  designate.  Class  "C"  shall 
receive  discounts  of  5%  to  20%  on  purchases  from  the 
Trust  Estate  and  in  addition  shall  share  in  the  excess 
profits  in  such  an  amount  and  at  such  times  as  the  trustees 
may  from  time  to  time  determine  after  dividends  have 
been  paid  on  Class  "A"  and  Class/'B". 

Paragraph  30  provides  tliat  certificates  of  Classes  "A" 
and  "C"  may  be  called  in  and  retired  at  any  time  after 
five  years  from  the  date  of  their  issue  at  par  value  with  ac- 
cumulated dividends. 

Paragraph  40  provides  that  at  no  time  and  under  no  cir- 
cumstances and  in  no  form  whatever  can  a  certificate  hold- 
er be  made  liable  for  anything  connected  with  the  Trust 
Estate. 

Paragraphs  50  to  55  provide  for  an  annual  meeting  of 
the  certificate  holders  and  the  election  of  an  Advisory 
Board  to  watch  and  protect  their  interests  " 

Additional  Certificates. 

35.  In  addition  to  the  Beneficial  Interests  hereinabove  pro- 
vided for  and  described,  the  said  Trustees  may,  as  frequently 
as  they  desire,  issue  other  and  additional  certificates  for  com- 
mon or  preferred  beneficial  interests  at  such  time  or  times,  to 
such  an  extent  and  in  such  quantities,  as  they  may  deem  nec- 
essary and  proper,  to  any  person  or  persons  who  may  have 
paid  to  them  as  such  trustees,  or,  who  shall  pay  to  them  as  such 
trustees,  the  sum  of  not  less  than  $10.00  or  any  multiple  there- 
of, for  any  beneficial  interest  in  the  trust  estate  hereby  created. 

Substitute  Certificates. 

36.  In  consideration  of  the  land  which  has  been  transferred 


542  Trusts  for  Business  Purposes. 

to  the  Trustees  by  the  Sunny  South  Developing  Company,  Inc. 
there  shall  be  issued  to  it  looo  Class  "A"  and  looo  Class  "B" 
beneficial  interests,  representing  the  fair  cash  market  value  of 
said  land.  In  consideration  of  the  services  rendered  in  and 
about  the  formation  of  this  Trust  by  John  Stelk  and  Albert  W. 
Keller,  two  of  the  Trustees,  there  shall  be  issued  to  the  said 
John  Stelk  Three  Hundred  Class  "B"  Beneficial  Certificates, 
and  to  Albert  W.  Keller  Two  Hundred  Class  "B"  Beneficial 
Certificates,  which  is  to  be  in  full  payment  and  satisfaction  of 
tlie  services  rendered  by  them  until  the  signing  and  execution 
of  this  Instrument,  leaving  looo  Class  "A"  Beneficial  Interests 
1500  Class  "B"  Beneficial  Interests  and  2000  Class  "C"  Bene- 
ficial Interests,  to  be  dealt  with  and  disposed  of  by  the  trustees 
for  the  benefit  of  the  Estate,  as  provided  herein.  Certificates 
representing  Class  "A"  beneficial  interests  and  Class  "C"  bene- 
ficial interests  now  or  hereafter  issued,  shall  be  sold  by  the 
trustees  for  not  less  than  $10.00  per  beneficial  interest,  on  such 
terms  of  payment  as  they  may  decide,  provided  however,  that 
the  trustees  may  allow  a  sum  of  not  to  exceed  $2.50  per  bene- 
ficial interest  for  commission,  expenses  or  services  in  and  about 
such  sale.  The  trustees  may  fix  such  terms  as  to  them  may 
seem  expedient  for  the  acquisition  of  such  additional  beneficiary- 
certificate  holders.  The  Trustees  may  from  time  to  time,  in 
their  discretion,  invite  and  receive  subscriptions  for  beneficial 
interests,  in  this  estate,  either  in  cash  or  in  property  in  their 
discretion,  for  the  purpose  of  increasing  the  capital  investment 
of  the  trust  estate,  subject  always  to  the  terms  and  provisions 
of  this  instrument,  and  accept  or  reject  the  same. 

Salk  on  Installment  Plan. 
38.     In  case  any  person  agrees  to  subscribe  for  beneficial  in- 
terests in  this  trust  and  to  pay  his  or  her  subscription  therefor 


Appendix.  543 

in  installments,  the  trustees  shall  have  full  power  and  discretion 
to  collect  such  payments  upon  such  terms  and  conditions  as 
they  may  see  fit  to  impose,  and  to  receive  the  same  either  in 
property  at  its  fair  cash  market  value,  or  in  cash,  as  they  may 
elect.  If  any  person  having  subscribed  for  a  beneficial  interest 
or  for  beneficial  interests  hereunder  upon  the  installment  plan 
shall  neglect  to  pay  any  installment  at  any  time  specified,  the 
trustees  may,  if  they  see  fit,  cancel  the  subscription  of  such  per- 
son and  declare  the  amount  of  his  or  her  payment,  if  any,  for- 
feited to  the  Trust  Estate. 

Who  CoNsiDERElD  Beneificiary. 

39.  The  person  in  whose  name  a  certificate  stands  recorded 
upon  the  books  of  this  Trust  shall  be  conclusively  considered 
by  the  Trustees  to  be  the  beneficiary  and  entitled  to  such  rights 
and  benefits  as  are  evidenced  thereby,  and  the  Trustees  shall 
not  be  affected  by  any  notice  to  the  contrary,  either  actual  or 
constructive;  and  it  shall  not  be  the  duty  of  the  Trustees  upon 
transferring  such  certificate  or  paying  dividends  thereon  or  dis- 
tributing assets  upon  liquidation  of  the  Trust  Estate,  or  at  any 
time,  to  inquire  in  any  way,  into  the  relations  of  assignor  and 
assignee,  pledgor  or  pledgee.  Trustee  and  Cestui  Que  Trust, 
guardian  and  ward,  or  into  any  other  similar  relations  with  re- 
spect to  said  certificate  or  any  right  or  interest  therein.  The 
Trustees  shall  be  under  no  liability  or  responsibility  of  any  kind 
or  character  for  making  or  causing  to  be  made  upon  the  books 
of  the  Trust,  the  transfer  of  any  certificate  out  of  the  name  of 
the  prior  registered  holder  of  the  certificate,  in  pursuant  to  an 
assignment  thereof,  by  such  prior  registered  holder  or  upon  or 
in  pursuance  to  other  authority,  in  writing,  signed  by  such  prior 
registered  holder.     Those  who  may  hereafter  become  benefi- 


544  Trusts  for  Business  Purposes. 

claries  under  this  trust  shall  have  the  same  rights  as  the  original 
beneficiaries  hereunder,  and  shall  in  like  manner  be  bound  by 
the  terms  and  conditions  of  this  agreement  and  declaration  of 
trust. 

No  Liability  as  to  Beneficiaries. 

40.  No  assessment  or  personal  liability  or  obligation  shall 
under  any  circumstances  or  in  any  event  be  made  or  imposed 
upon  the  beneficiaries  as  such,  or  any  of  them,  without  the  con- 
sent, in  writing,  of  each  and  every  such  beneficiary,  and  the 
endorsement  or  notation  of  such  consent  and  of  the  extent  and 
terms  thereof,  upon  each  outstanding  beneficiary  certificate. 
Neither  the  Trustees  nor  any  of  them,  nor  any  of  the  officers, 
manager  or  employees  of  them,  shall  have  any  right,  power  or 
authority  under  any  circumstances  or  in  any  event  to  act  as 
agent  of  the  beneficiaries  or  any  of  them,  or  to  create  or  incur 
any  liability  or  obligation  for  them  or  on  their  account.  The 
Holders  of  Beneficial  Interests,  nor  any  of  them,  shall  be 
deemed  in  any  way  whatever  liable  or  responsible  as  partners, 
or  in  any  manner  liable  otherwise  than  in  this  instrument  spe- 
cifically provided. 

Disability  of  Beneficiary. 

41.  The  Executor,  administrator,  or  assigns  of  any  deceased 
certificate  holder  shall  succeed  to  the  rights  of  such  decedent 
under  this  trust,  and,  upon  the  surrender  of  the  certificate  or 
certificates  for  the  interests  owned  by  said  deceased  certificate 
holder,  a  new  certificate  or  certificates  may  be  issued  in  lieu 
thereof. 

Rights  of  Beneficiary. 

42.  The  ownership  of   beneficial  interests  hereunder  shall 


Appendix.  545 

not  entitle  the  holder  to  any  title  whatsoever  in  the  trust  prop- 
erty, and  the  owner  of  any  beneficial  interest  herein  hereby  ex- 
pressly waives  and  releases  any  and  all  claims  to  demand  or 
enforce  the  return  of  the  money  invested  in  this  trust,  or  any 
equivalent  thereof,  or  the  increase  thereof,  either  at  law  or  in 
equity,  directly  or  indirectly,  or  to  call  for  a  partition  or  division 
of  the  trust  property  or  any  part  thereof,  nor  shall  the  owner 
of  any  beneficial  interests  make  any  attack  upon  the  trustees 
herein  or  upon  the  Trust  Estate  in  any  court,  unless  such  owner 
is  supported  and  joined  in  such  attack  by  the  owners  of  at  least 
a  majority  of  the  then  outstanding  beneficial  interests  and  every 
owner  of  beneficial  interests  herein,  now  existing  or  who  may 
hereafter  become  such,  expressly  covenants  and  agrees  with  the 
trustees  herein  and  all  owners  of  beneficial  interests  that  in  no 
case  shall  any  court  be  called  upon  to  dissolve  the  trust  created 
hereby,  but  that  the  court  shall  only  be  appealed  to  for  the  pur- 
pose of  correcting  the  evil,  by  compelling  the  trustees  to  carry 
out  the  trust  created  hereby,  and  on  their  refusal,  to  remove 
them  and  appoint  others  in  their  places. 

Profits — Dividends. 

43.  All  profits  arising  from  the  operation  of  the  trust  estate 
shall  be  and  become  a  part  of  the  trust  estate  as  fast  as  accumu- 
lated and  shall  be  dealt  with  as  the  trustees  may  see  fit.  The 
trustees  may,  from  time  to  time,  declare  and  pay  dividends  out 
of  the  earnings  as  received  by  them,  but  the  amount  of  such 
dividends  and  the  payment  thereof  shall  be  wholly  in  the  dis- 
cretion of  the  trustees;  provided,  that  the  preferred  certificates, 
as  herein  provided  for,  shall  have  such  prior  and  preferred 
rights  as  are  herein  mentioned. 


546  Trusts  for  Business  Purposes. 

Liability  for  Debts. 

44.  The  beneficiaries  and  their  assigns  and  all  persons  and 
corporations  by  whom  credit  is  extended,  or  with  whom  con- 
tracts are  made,  or  who  may  have  claims  against  the  trustees, 
shall  look  only  to  the  funds  and  property  of  the  trust  for  the 
payment  under  such  contract  or  claim,  or  for  the  payment  of 
any  debt,  damage,  judgment,  decree,  or  of  any  money  that  may 
otherwise  become  due  or  payable  to  them  from  the  trustees,  as 
such;  so  that  neither  the  trustees  nor  the  certificate  holders 
hereunder,  present  or  future,  shall  be  personally  liable  therefor. 

General  Offices. 

45.  The  general  offices  of  the  trust  estate  shall  be  located 
at  Oak,  Baldwin  County,  Alabama,  or  at  such  other  place  or 
places  as  the  trustees  may,  from  time  to  time  designate. 

Fiscal  Year. 

46.  The  fiscal  year  of  the  trustees  shall  begin  and  end  as 
the  trustees  may  determine,  provided,  that  unless  otherwise  de- 
termined by  the  trustees,  the  fiscal  year  shall  be  the  calendar 
year. 

No  Dissolution  of  Trust. 

47.  This  Trust  shall  not  be  dissolved  or  its  business  affected 
by  the  death,  insolvency,  or  incapacity  of  one  or  more  of  the 
beneficiaries,  nor  shall  death,  insolvency,  or  incapacity 
entitle  the  legal  representatives  or  heirs  or  assigns,  voluntary 
or  involuntary,  of  such  deceased,  insolvent  or  incapacitate"  1 
beneficiary,  to  any  accounting  or  to  any  action  at  law 
or  equity,  or  otherwise  against  the  Trustees,  or  against  the 
Trust  Estate,  or  any  part  thereof;  but  such  legal  representa- 


Appendix.  547 

tives,  heirs,  assigns,  of  such  beneficiaries  shall  succeed  to  the 
rights  of  the  deceased,  insolvent  or  incapacitated  beneficiary, 
subject  to  the  terms  of  this  Declaration  of  Trust,  and  shall  suc- 
ceed to  nothing  more. 

Termination  of  Trust. 

48.  If,  at  any  time,  the  trustees  deem  it  best  so  to  do,  they 
may  terminate  this  trust  and  wind  up  the  business  thereof ; 
and  in  any  event,  this  trust  shall  terminate  twenty-one  years 
after  the  death  of  the  last  trustee  named  herein. 

Distribution  of  Assets. 

49.  In  the  event  of  the  termination  of  the  trust  Estate  and 
of  the  distribution  of  the  assets  thereof,  the  holders  of  the 
common  beneficial  inerests,  known  as  Class  "B"  certificates, 
shall  divide  the  residue  of  the  trust  estate,  after  full  payment 
to  the  holders  of  Class  "A"  and  Class  "C"  certificates.  All  of 
the  debts  and  expenses  of  the  estate  shall  be  paid  before  any- 
thing shall  be  distributed  to  the  holders  of  any  of  the  beneficial 
interests. 

Holders  of  Beneficial  Interests  Annual  Meeting. 

50.  Holders  of  beneficial  interests  may  hold  an  annual 
meeting  at  such  time  and  place  as  they,  from  time  to  time,  may 
by  resolution  determine.  The  first  annual  meeting  of  such 
holders  shall  be  held  at  the  Bienville  Hotel,  Mobile,  Alabama, 
on  the  2nd  Tuesday  in  February,  1923,  at  10:00  o'clock  A.  M. 
The  meeting  may  be  adjourned  to  another  place  and  a  later  time 
by  the  vote  of  a  majority  of  the  holders  present,  counting  in- 
dividuals, and  not  interests. 


548  Trusts  i'or  Business  Purposes. 

Election  o-e  an  Advisory  Board. 

51.  At  the  meeting  on  the  Second  Tuesday  of  February, 
1923,  or  at  any  adjourned  meeting  thereof,  the  holders  of  Bene- 
ficial Interests  may  elect  an  Advisory  Board,  consisting  of  as 
many  individuals  as  they  may  desire,  whose  duty  shall  be  to 
watch  over  and  protect  the  interests  of  the  holders  of  beneficial 
interests  in  the  Trust  herein  created.  The  term  of  office  and 
the  duties  of  the  members  of  said  Advisory  Board  shall  be 
fixed  and  determined  by  said  holders  of  beneficial  interests. 
Said  Advisory  Board,  nor  any  of  its  members,  shall  under  any 
circumstances,  have  any  vote  or  voice  in  the  meetings  of  the 
Trustees,  nor  any  right  to  dictate  to  said  Trustees,  or,  in  any 
manner  whatever  interfere  with  them  in  the  exercise  of  their 
rights  and  the  discharge  of  their  duties,  under  the  trust  by 
this  instrument  created.  The  Trustees  appointed  herein  and 
their  successors,  shall  at  no  time  or  place  be  under  the  jurisdic- 
tion, direction  or  control  in  whole  or  in  part  of  said  Advisory 
Board,  or  any  of  its  members. 

How  Advisory  Board  Elected. 

52.  At  every  annual  meeting  of  the  holders  of  Beneficial 
Interests  each  such  Holder  sliall  be  entitled  to  cast  one  vote  for 
each  beneficial  interest  held  in  his  name;  which  vote  may  be 
cast  by  him  either  in  person  or  by  proxy.  All  proxies  shall  be 
in  writing,  and  shall  be  filed  and  recorded  as  the  Holders  of 
Beneficial  Interests  may  direct. 

In  voting  for  the  members  of  the  Advisory  Board,  each 
Holder  of  a  Beneficial  Interest  shall  have  the  right  to  vote,  in 
person  or  by  proxy,  for  the  number  of  such  beneficial  interests 
held  or  owned  by  him,  for  as  many  persons  as  there  are  mem- 
bers of  the  Advisory  Board  to  be  elected,  or  to  cumulate  said 


Appendix,  549 

interests  and  give  one  candidate  as  many  votes  as  the  number 
of  members  multiplied  by  the  number  of  his  interests  shall 
equal,  or  to  distribute  them  on  the  same  principal  among  as 
many  candidates  as  he  shall  think  fit. 

A  quorum  for  the  transaction  of  business  at  any  meeting  of 
Holders  of  Beneficial  Interests  shall  consist  of  a  number  ot 
members  representing  a  majority  of  the  beneficial  interests  is- 
sued and  outstanding ;  but  the  members  present  at  any  meeting, 
though  less  than  a  quorum,  may  adjourn  the  meeting  to  a  future 
time. 

Meeting  of  Advisory  Board. 

53.  The  holders  of  Beneficial  Interests  may  provide  that  the 
Advisory  Board  shall  meet  at  such  times  and  places  as  may  be 
designated  by  the  Holders  of  Beneficial  Interests ;  that  it  may 
make  and  unmake  by-laws  and  rules  for  its  own  guidance ;  elect 
a  set  of  officers ;  keep  minutes  of  its  meetings  and  make  reports 
to  the  holders  of  Beneficial  Interests,  and  lay  such  other  duties 
upon  said  board,  not  in  conflict  with  this  instrument,  as  they 
may  deem  proper. 

Object  of  Advisory  Board. 

54.  The  object  of  said  Advisory  Board  shall  only  be  to 
keep  in  touch  with  the  Trustees  appointed  under  this  instru- 
ment, and  their  successors,  and  their  meetings.  Learn  from 
all  possible  sources  whether  everything  is  being  done  by  the 
trustees  that  should  be  done  in  order  to  faithfully  carry  out  the 
terms  of  the  Trust  hereby  created.  To  call  the  attention  of  the 
Trustees  to  any  and  all  mismanagement  or  misconduct  on  the 
part  of  any  of  the  Trustees,  their  officers  or  servants ;  report  to 
the  holders  of  Beneficial  Interests  from  time  to  time  just  how 


550  Trusts  for  Business  Purposes. 

the  Trust  hereby  created  stands  and  is  proceeding,  and  Avhether 
the  Trustees  are  discharging  their  duty.  Said  Advisory  Board 
shall,  however,  be  very  careful  to  first  ascertain  all  the  facts 
and  weigh  them  carefully  before  making  any  attack  upon  the 
Trustees  or  their  management  of  the  Trust  Estate. 

Different  Units  May  Be  Established. 

55.  In  case  the  holders  of  Beneficial  Interests  become  nu- 
merous and  scattered  as  to  place  of  residence,  they  may,  at  any 
of  their  annual  meetings  determine  to  divide  themselves  into 
units  and  elect  one  or  more  representatives  from  each  unit  to 
the  Advisory  Board.  The  details  of  such  an  arrangement  is 
left  entirely  to  the  holders  of  Beneficial  Interests. 

Rules  of  Construction. 

56.  In  the  construction  of  this  Declaration  of  Trust,  the 
following  rules  shall  be  observed  unless  such  construction  will 
be  inconsistent  with  its  manifest  intent  or  repugnant  to  its  con- 
text, that  is  to  say: 

First — All  general  provisions,  terms,  phrases  and  expressions 
shall  be  liberally  construed  in  order  that  the  true  intent  and 
meaning  of  the  trust  hereby  created  may  be  fully  carried  out. 

Second — Words  in  the  present  tense  include  the  future. 

Third — Words  importing  the  singular  number  may  extend 
and  be  applied  to  several  persons  or  things,  and  words  import- 
ing the  plural  number  may  include  the  singular. 

Fourth — Words  importing  the  masculine  gender  may  be  ap- 
plied to  females. 

Fifth — The  word  "person"  or  "persons"  as  well  as  all  words 
referring  to  or  importing  persons,  may  extend  and  be  applied 
to  bodies,  politic  and  corporate,  as  well  as  individuals. 


Appendix.  551 

Declaration  Subject  to  Inspection. 

57.  A  true  copy  of  this  agreement  and  Declaration  of  Trust 
shall  be  constantly  on  file  at  the  office  of  the  Trustees  and  shall 
be  open  to  the  inspection  of  the  beneficiaries  hereunder  at  all 
reasonable  times. 

Conclusion. 

58.  In  Witness  Whereof,  the  Trustees  hereinbefore  men- 
tioned, have  hereunto  set  their  hands  and  seals  for  themselves' 
and  their  successors,  in  token  of  their  acceptance  of  the  agree- 
ments, conditions,  and  trust  hereinbefore  mentioned,  and  the 
Sunny  South  Developing  Co.  Inc.  has  caused  this  instrument 
to  be  signed  by  its  President  and  attested  by  its  Secretary  and 
its  Corporate  Seal,  pursuant  to  full  and  complete  authority 
granted  by  its  Board  of  Directors,  for  itself  and  its  assigns  in 
token  of  its  acceptance,  assent  to,  and  approval  of  such  agree- 
ments, conditions  and  trusts,  on  the  day  and  year  first  above 
written. 

SUNNY  SOUTH  DEVELOPING  CO.  Inc. 

By: 

President. 
Attest : 

Secretary. 

(SEAL) 

(SEAL) 

(SEAL) 

Trustees. 


552  Trusts  for  Business  Purposes. 

State  oe  Alabama,  |  ^^ 
Baldwin  County,     \ 

I^ a  Notary  Public,  in  and  for  said 

State  and  County,  do  hereby  certify  that  John  Stelk,  the 
President  of  the  Sunny  South  Developing  Company,  Inc.  and 
Albert  W.  Keller,  the  Secretary  of  said  company,  whose 
names  are  signed  to  the  foregoing  conveyance  as  president  and 
secretary  of  said  company  acknowledged  before  me,  on  this  day, 
that  being  informed  of  the  contents  of  said  conveyance  they  as 
such  officers  and  with  full  authority  executed  the  same  volun- 
tarily on  the  day  and  date  the  same  bears  for  and  as  the  act  of 
said  company. 

Given  under  my  hand  and  notarial  seal  this of 

A.  D.  1922. 


State  oe  Alabama,      X  ^^ 


Notary  Public. 


County  of  Baldwin,    J 

I, a  Notary  Public  in  and  for  and 

residing  in  the  County  and  State  aforesaid,  do  hereby  certify 
that  John  Stelk,  Albert  W.  Keller  and  Viola  Stelk,  who 
are  personally  known  to  me  to  be  the  same  persons  whose  names 
are  subscribed  to  the  foregoing  instrument,  appeared  before 
me  this  day  in  person  as  trustees  and  acknowledged  as  such 
trustees,  that  being  informed  of  the  contents  of  said  instru- 
ment, they  executed  the  same  voluntarily  on  the  day  the  sarne 
bears  date.  I  further  certify  that  my  commission  is  still  in 
full  force  and  effect. 

Given  under  my  liand  and  notarial  seal  this 

day  of A.  D.  1922. 

Notary  Public. 


Appendix.  553 

REAL  ESTATE  TRUSTS. 

Homan  Real  Estate  Trust  Deed,  Boston  Real  Estate  Trust 
Agreement  and  Warren  Chambers  Agreement  and  Decla- 
ration of  Trust  were  adjudicated  in  the  case  of  Priestley 
V.  Burrill,  230  Mass.  452;  120  N.  E.  100.  Copy  of  the 
Trust  Agreements  are  as  follows: 

HoMANs  ReaIv  Estate  Trust  Deed. 

Know  all  men  by  these  presents  that  we,  Robert  Romans 
and  Reginald  Foster,  both  of  Boston,  in  the  county  of  Suf- 
folk and  commonwealth  of  Massachusetts,  being  about  to 
take  title  to  a  certain  parcel  of  land  with  the  buildings 
thereon,  numbered  50  Essex  street,  situated  in  said  Boston, 
and  bounded  southeasterly  on  Chauncey  street,  southwesterly 
on  Essex  street,  northwesterly  on  Harrison  Avenue,  and 
northerly,  northwesterly  again  and  northeasterly  on  land  now 
or  late  of  F,  M.  Frost  et  al.,  containing  5,186  square  feet 
more  or  less  and  being  all  the  land  recently  owned  by  the 
trustees  under  the  will  of  John  Romans  late  of  said  Boston 
who  died  in  1868,  hereby  declare  that  we  will,  and  our 
heirs,  successors,  administrators  and  executors  shall  hold  said 
parcel  of  land  and  any  and  all  property,  real  and  personal, 
which  may  be  conveyed  or  transferred  to  us  as  trustees  here- 
under, upon  the  trusts  hereinafter  set  forth  for  the  benefit  of 
the  owners  of  the  shares  hereinafter  described. 

1.  The  term  "trustees"  hereinafter  used  shall  mean  not 
only  those  above  mentioned,  but  whoever  may  be  trustee  or 
trustees  for  the  time  being.  The  term  "shareholder"  herein- 
after used  shall  mean  holder  of  record  of  a  certificate  of 
shares  hereunder. 

2.  The  trustees  shall  issue  certificates  of  shares  of  the 
aggregate  amount  of  two  hundred  and   forty  thousand  dol- 


554  Trusts  for  Business  Purposes. 

lars  divided  into  shares  of  the  par  value  of  one  hundred  dol- 
lars each,  and  shall  deliver  said  certificates  to  the  person  by 
whom  the  parcel  of  land  above  described  is  conveyed  to 
them  delivering  to  each  of  said  persons  shares  bearing  the 
same  proportion  to  the  total  amount  of  the  shares  to  be  is- 
sued as  above  stated  as  his  or  her  undivided  interest  in  said 
parcel  bears  to  the  total  value  of  the  same.  The  trustees 
shall  also  have  the  power  to  issue  certificates  for  additional 
shares  hereunder  if  they  are  authorized  so  to  do  by  vote  of  a 
majority  of  the  shareholders  as  provided  in  clause  lo,  but  not 
otherwise. 

3.  The  trustees  shall  have  entire  control  and  management 
of  the  trust  property.  They  may  mortgage  or  lease  the  same, 
or  any  part  thereof,  from  time  to  time  on  such  terms  and 
for  such  times  as  they  think  best :  Provided  that  they  shall 
not  mortgage  said  property  or  any  part  thereof  for  more  than 
twenty  thousand  dollars  unless  authorized  so  to  do  by  vote 
of  a  majority  of  the  shareholders  as  provided  in  clause  10. 
They  may  also  sell  said  property  or  any  part  thereof  at  any 
time  and  from  time  to  time  on  such  terms  as  they  think  best. 
They  may  borrow  money  for  temporary  exigencies  or  for 
adding  to,  repairing,  rebuilding  or  furnishing  any  building 
on  land  held  by  them  for  erecting  new  buildings  on  such  land 
in  such  manner  and  on  such  terms  as  they  think  best,  and  may 
give  their  notes  as  trustees  therefor.  No  purchaser,  mort- 
gagee, lessee  or  lender  shall  be  responsible  for  the  application 
of  money  paid  or  loaned  to  the  trustees.  The  trustees  may 
exchange  land  and  purchase  additional  land  for  the  purpose 
of  straightening  or  altering  boundary  lines,  and  may  grant, 
release  and  acquire  easements.  They  may  from  time  to  time 
hire  suitable  offices  for  the  transaction  of  the  business  of  the 
trust  fund  and  may  incur  such  other  expenses  and  employ 


Appendix.  555 

such  clerks  and  other  servants,  transfer  agents,  lawyers  and 
brokers  as  they  may  think  best,  and  they  may  execute,  ac- 
knowledge and  record  any  and  all  instruments  necessary  or 
convenient  for  the  purposes  of  the  trust.  They  or  either  of 
them  may  act  as  counsel  when  it  is  proper  to  employ  counsel 
and  receive  reasonable  compensation  therefor.  They  may 
make  all  such  contracts  and  do  all  such  things  as  they  think 
best  for  the  maintenance  and  management  of  the  trust  prop- 
erty and  of  the  trust  and  may  pay  all  expenses  out  of  any 
assets  of  the  trust. 

4.  The  compensation  of  the  trustees  for  their  services  as 
such  shall  amount  to  five  per  cent,  of  the  gross  income  of 
the  trust  property,  and  in  case  of  a  sale  of  said  property  or 
any  part  thereof,  one  per  cent,  of  the  price  for  which  the 
same  is  sold. 

5.  The  trustees  shall  be  responsible  only  for  a  willful 
breach  of  trust,  and  any  trustee  only  for  his  own  acts;  and 
no  trustee  shall  be  required  to  give  a  bond.  Any  trustee  may 
resign  his  office  by  a  written  instrument  recorded  with  Suffolk 
deeds. 

6.  The  number  of  trustees  hereunder  shall  be  kept  at  two, 
and  each  new  trustee  shall  have  the  same  powers  as  if  orig- 
inally named  herein.  In  case  said  Reginald  Foster  ceases  to 
be  a  trustee  hereunder  before  the  termination  of  the  trust  his 
successor  shall  be  appointed  by  the  Old  Colony  Trust  Com- 
pany, a  corporation  organized  under  the  laws  of  said  com- 
monwealth and  having  a  usual  place  of  business  in  said 
Boston,  by  a  writing  recorded  with  said  deeds,  if  said  corpora- 
tion is  at  the  time  the  guardian  of  any  child  of  the  late  Caro- 
line Homans  Priestley,  wife  of  Neville  Priestley,  who  is  then 
a  shareholder  hereunder,  but  not  otherwise. 

7.  When   any   trustee   is   absent    from   the   commonwealth 


556  Trusts  i^or  Business  Purposes. 

aforesaid,  or  unable  to  perform  his  duties,  the  remaining 
trustee  shall  have  the  power  to  act :  Provided  that  in  no  case 
shall  one  trustee  so  acting  do  any  act  affecting  the  title  of  the 
trust  property  or  incur  any  debt  or  liability  exceeding  in  the 
aggregate  five  thousand  dollars  during  any  such  period  of 
absence  or  disability ;  and  the  certificate  of  any  trustee  as 
to  such  absence  or  disability  shall  be  conclusive. 

8.  The  trustees  shall  annually  or  oftener  in  their  discretion 
divide  the  net  income  from  the  trust  property  among  the 
shareholders :  Provided,  however,  that  the  trustees  may  set 
aside  before  paying  any  dividend  whatever  sum  they  see  fit 
as  a  sinking  or  contingent  fund,  to  be  applied  to  repaying 
loans  made  by  the  trustees,  whether  unsecured  or  secured 
by  mortgage  on  the  trust  property  or  otherwise ;  to  making 
repairs  to  and  alterations  in  said  property;  and  to  meeting 
extraordinary  expenses.  They  may  invest  and  reinvest  said 
fund  and  any  money  they  may  have  on  hand  at  any  time  in 
any  securities  they  see  fit.  Their  decision  as  to  what  con- 
stitutes net  income  shall  be  conclusive  on  all  parties. 

9.  The  trustees  may  call  meetings  of  shareholders  at  any 
time,  and  shall  do  so  upon  the  written  request  of  any  share- 
holder. Notices  of  meetings  shall  be  given  at  least  five  days 
beforehand  by  mail  and  every  such  notice  shall  state  the  pur- 
pose of  the  meeting  called.  Such  notices  shall  be  binding 
upon  each  shareholder  if  mailed  postage  prepaid  to  the  ad- 
dress last  given  by  him  to  the  trustees,  or  in  default  thereof 
to  his  last  known  place  of  business  or  abode :  Provided  that 
notice  to  any  shareholder  who  is  a  minor  may  be  given  to  his 
guardian  instead  of  to  him.  Notices  shall  be  deemed  to  be 
given  at  the  time  that  they  are  mailed  as  above  stated. 

10.  Shareholders   may  vote  at   meetings   in  person  or  by 
proxy  and  in  case  any  shareholder  is  a  minor,  a  proxy  exe- 


Appendix.  557 

cuted  by  his  guardian  will  be  suflBcient.  The  holders  of  a 
majority  of  the  entire  number  of  shares  outstanding  may,  by 
vote  at  any  meeting  called  for  the  purpose,  authorize  the 
trustees  to  issue  shares  hereunder  in  addition  to  those  provided 
for  by  clause  2  and  fix  the  price  at  which  the  same  shall  be 
issued,  and  may  authorize  the  trustees  to  mortgage  the  trust 
property  or  any  part  thereof  for  any  amount  exceeding  twenty 
thousand  dollars  for  such  times  and  on  such  terms  as  they 
see  fit.  The  statements  of  one  or  more  of  the  trustees  con- 
tained in  certificates  relating  to  meetings  of  the  shareholders, 
or  other  matters  connected  with  the  trust,  and  recorded  with 
Suffolk  Deeds,  shall  be  conclusive  upon  all  parties  as  to  the 
facts  therein  stated. 

11.  The  trustees  shall  not  have  any  power  or  authority  to 
enter  into  any  contract  that  shall  bind  or  affect  the  share- 
holders personally,  or  call  upon  them  for  any  payment  whatso- 
ever other  than  the  amounts  of  the  respective  subscriptions; 
but  the  trustees  shall  be  entitled  to  indemnity  against  any  and 
all  liabilities  which  they  may  incur,  or  to  which  they  may  be 
subject,  out  of  the  trust  property,  and  may  make  any  contract 
hereby  authorized  in  such  manner  that  the  same  and  any  lia- 
bility thereunder  shall  be  enforceable  against  the  trust  prop- 
erty, and  all  persons  or  corporations  extending  credit  to,  con- 
tracting with,  or  having  any  claims  against  the  trustees  shall 
look  only  to  the  property  of  the  trust  for  the  payment  of  any 
such  contract  or  claim,  or  for  the  payment  of  any  debt,  dam- 
age, judgment  or  decree,  or  of  any  money  that  may  otherwise 
become  due  or  payable  to  or  from  the  trustees,  so  that  neither 
any  trustee  nor  shareholder,  present  or  future,  shall  be  per- 
sonally liable  therefor. 

12.  .  Shares  hereunder  shall  be  personal  property  and  shall 
be  transferable  only  on  the  books  of  the  trustees  upon  sur- 


558  Trusts  for  Business  Purposes. 

render  of  the  certificate  therefor.  Transferees  shall,  upon 
issue  of  new  certificates  to  them,  become  shareholders  here- 
under, and  entitled  to  all  the  rights  and  subject  to  all  the  lia- 
bilities of  the  original  subscribers  hereto. 

13.  This  trust,  if  not  sooner  terminated  by  sale  of  the 
property  by  the  trustees,  shall  continue  for  twenty  years  after 
the  death  of  the  last  surviving  original  trustee  and  of  Kath- 
arine A.  Homans,  John  Homans,  Marian  J.  Homans,  Helen 
Homans  and  William  P.  Homans,  children  of  John  Homans, 
late  of  said  Boston,  who  died  in  1903. 

14.  Upon  the  expiration  of  the  said  limit  of  twenty  years 
the  trustees  shall  sell  any  and  all  property  then  subject  hereto. 
When  all  the  trust  property  is  sold  either  as  provided  in  this 
clause  or  as  hereinabove  provided,  the  proceeds  thereof  after 
the  payment  of  all  the  debts  and  expenses  of  the  trust,  the 
expenses  of  the  sale,  and  the  commissions  of  the  trustees 
shall  be  divided  among  the  shareholders  in  proportion  to  the 
number  of  shares  owned  by  them  of  record.  In  case  any 
portion  of  the  trust  property  is  sold  or  taken  by  eminent 
domain  and  any  other  property  still  remains  subject  to  the  trust, 
the  trustees  may  either  divide  the  proceeds  of  the  sale  or 
the  damages  obtained  on  account  of  the  taking,  after  deduct- 
ing the  debts,  expenses  and  commissions  above  mentioned  or 
the  expenses  of  obtaining  such  damages,  among  the  share- 
holders in  the  proportions  above  stated,  or  may  hold  the  same 
and  apply  them  in  such  manner  as  they  may  see  fit  to  the  pur- 
poses of  the  trust. 

In  witness  whereof  we  hereunto  set  our  hands  and  seals 
this  first  day  of  November,  1905. 

Robert  Homans,  (Seal.") 

Reginald  Foster.  (Seal.) 


Appendix.  559 

BOSTON  REAL  ESTATE  TRUST  AGREEMENT. 

The   Boston  Real  Estate  Trust  Agreement  and   Declaration 
of  Trust,  Made  This  First  Day  of  May,  A.  D.    1886; 
Copyright  1886  by  Wm.  Minot  (for  the  Trustees). 
We,  the  subscribers,  hereby  agree  to  and  with  each  othei, 
and  in  consideration  of  our  mutual  agreements  as  follows: 

1.  We  agree  to  pay  at  any  time  within  two  years  from  the 
date  hereof  to  the  trustees  hereunder,  the  amounts  set  against 
our  names  respectively,  in  such  instalments  and  at  such  times 
as  said  trustees  may  require,  but  they  shall  not  require  any 
payment  until  the  total  amount  subscribed  amounts  to  two 
million  dollars.  In  case  any  subscriber  neglects  to  pay  any 
instalment  of  his  subscription  within  twenty  days  after  the 
date  of  call,  the  amount  of  his  subscription  then  unpaid  shall 
be  canceled  at  the  option  of  said  trustees. 

2.  John  Quincy  Adams  of  Quincy,  Robert  Codman,  Abbott 
Lawrence,  Samuel  Wells,  and  William  Minot,  Jr.,  of  Boston, 
all  of  the  commonwealth  of  Massachusetts,  shall  be  and  are 
hereby  made  trustees  hereunder. 

3.  Notices  delivered  personally  or  mailed,  with  prepay- 
ment of  postage,  five  days  beforehand,  to  any  subscriber 
hereto  or  any  shareholder  at  tlie  residence  given  on  his  sub- 
scription or  stated  in  his  certificate,  or  to  the  address  given 
by  him  from  time  to  time  to  said  trustees  shall  be  deemed 
binding. 

4.  Said  trustees  shall  use  all  money  paid  to  them  as  such, 
except  as  hereinafter  provided,  for  the  purchase  and  improve- 
ment of  real  estate  in  the  commonwealth  of  Massachusetts, 
and  all  real  estate  so  purchased  shall  be  conveyed  to  them 
in  joint  tenancy  as   trustees  hereunder. 

5.  Said   trustees   shall   have  as   such   as   absolute   control 


560  Trusts  for  Business  Purposes. 

over  and  disposal  of  all  real  estate  held  by  them  at  any  time 
under  this  trust  as  if  they  were  the  owners  thereof  includ- 
ing the  power  to  sell  for  cash  or  credit,  at  public  or  private 
sale,  to  mortgage  with  or  without  power  of  sale,  to  lease  or 
hire  for  improvement  or  otherwise  for  a  term  beyond  the 
possible  termination  of  this  trust  or  for  any  less  term,  to  let, 
to  exchange,  to  release  and  to  partition.  But  said  trustees 
shall  not  mortgage  any  real  estate  held  by  them  for  more 
than  thirty  per  cent,  of  the  value  of  the  property  so  mort- 
gaged, as  determined  by  the  last  preceding  assessment  made 
for  the  purpose  of  taxation.  This  provision  shall  not  how- 
ever affect  the  title  of  any  mortgage  and  no  purchaser  or 
mortgagee  shall  be  liable  for  the  application  of  money  paid 
or  lent.  In  granting  leases  or  making  contracts  for  buildings 
or  alterations  or  repairs  of  buildings  the  signatures  of  a  ma- 
jority of  said  trustees  shall  be  sufficient.  In  all  leases  and 
mortgages  it  shall  be  stipulated  that  the  shareholders  shall  not 
be  personally  liable  thereon. 

6.  Said  trustees  may  set  aside  not  more  than  ten  per 
cent,  of  the  annual  income,  for  a  contingent  fund,  or  sinking 
fund,  or  both.  They  shall  divide  the  net  income  of  the  prop- 
erty held  by  them  under  this  trust  among  the  shareholders 
annually  or  oftener  at  their  discretion  and  their  decision  as 
to  what  constitutes  net  income  from  time  to  time  shall  be 
final.  Said  contingent  or  sinking  fund  and  any  money  wait- 
ing investment  may  be  put  at  interest  or  invested  and  rein- 
vested in  interest  bearing  securities  by  said  trustees  at  their 
discretion. 

7.  Said  trustees  may  from  time  to  time  hire  suitable  of- 
fices for  the  transaction  of  the  business  of  the  trust,  appoint 
such  officers  and  agents,  including  an  agent  for  procuring 
subscriptions  to  this  agreement,  as  they  may  think  best,  fix  their 


Appendix.  561 

compensation  and  define  their  duties.  The  compensation  of 
said  trustees  shall  not  at  any  time  exceed  five  per  cent,  of 
the  income  of  the  property  held  by  them  under  this  trust. 

8.  Said  trustees  shall  issue  certificates  in  such  form  as 
they  shall  deem  best,  for  each  sum  of  one  thousand  dollars 
or  for  multiples  thereof  paid  to  them  under  this  agreement, 
but  no  certificate  shall  be  issued  for  any  less  sum  than  one 
thousand  dollars,  which  shall  be  deemed  a  share. 

9.  Shares  may  be  transferred  on  the  books  of  said  trustees 
by  the  person  named  in  the  certificate  thereof,  his  attorney 
or  legal  representative,  upon  the  surrender  of  the  certificate, 
and  a  new  certificate  shall  be  issued  to  the  transferee,  who 
shall  thereupon  become  subject  to  the  terms  of  this  agreement, 
but  no  share  shall  be  sold  until  the  holder  thereof  shall  have 
first  in  writing  offered  it  for  sale  to  said  trustees,  who  shall 
as  such  trustees  have  the  option  for  ten  days  after  the  receipt 
of  such  offer  of  buying  the  same  at  the  last  preceding  ap- 
praisal made  by  them.  They  shall  make  such  appraisal  annu- 
ally or  oftener  as  they  may  deem  best.  Shares  so  purchased 
by  said  trustees  may  be  held  as  part  of  said  contingent  or 
sinking  fund,  or  sold  by  them  at  their  discretion.  Devises 
by  will,  distribution  of  the  estates  of  persons  dying  intestate 
and  distribution  of  trust  funds  among  those  entitled  thereto 
upon  the  termination  of  trusts  shall  not  be  deemed  sales  for 
the  purpose  hereof. 

10.  Said  trustees  may  from  time  to  time  at  their  discretion 
invite  and  receive  further  subscriptions  for  the  purpose  of 
increasing  the  capital  of  the  trust  giving  preference  upon  such 
terms  and  conditions  as  they  shall  deem  best  to  existing  share- 
holders. All  subscriptions  shall  be  subject  to  the  terms  of  this 
agreement. 


562  Trusts  for  Business  Purpose;s. 

11.  No  assessment  shall  ever  be  made  upon  the  share- 
holders. 

12.  The  books  of  said  trustees  shall  always  be  open  to  the 
inspection  of  shareholders. 

13.  Any  trustee  under  this  agreement  may  resign  his  trust 
by  a  written  instrument  signed  by  him  and  acknowledged  in 
the  manner  prescribed  for  the  acknowledgment  of  deeds,  and 
such  instrument  shall  be  recorded  in  the  registry  of  deeds 
for  the  county  of  Suffolk  in  said  commonwealth.  Any  va- 
cancy occurring  from  any  cause  at  any  time  in  the  number 
of  said  trustees  shall  be  filled  by  the  remaining  trustees  by 
an  instrument  in  writing  acknowledged  and  recorded  as  afore- 
said, and  such  new  trustee  shall  have  the  same  power  as  if 
originally  named  herein.  When  any  trustee  is  absent  from 
the  commonwealth  or  incapable  by  reason  of  disease,  the 
other  trustees  shall  have  all  the  powers  hereunder,  and  any 
trustee  may  by  power  of  attorney  delegate  his  powers  for 
a  period  not  exceeding  six  months  at  any  one  time  to  any 
other  trustee  or  trustees  hereunder,  provided  that  in  no  case 
shall  less  than  three  trustees  actually  exercise  the  powers 
hereunder.  The  term  "said  trustees"  used  in  this  agreement 
shall  be  deemed  to  mean  those  who  are  or  may  be  trustees  for 
the  time  being.     No  trustee  shall  be  required  to  give  a  bond. 

14.  This  trust  shall  continue  for  twenty  years  after  the 
death  of  the  last  survivor  of  the  following  named  persons: 
(Naming  20  persons.) 

Provided  that  upon  the  request  of  three  fourths  in  value  of 
the  shareholders,  signed  and  acknowledged  in  the  manner 
prescribed  for  the  acknowledgment  of  deeds,  and  recorded 
in  said  Suffolk  registry  of  deeds,  said  trustees  shall  terminate 
the  trust  or  convey  the  trust  property  to  new  or  other  trus- 
tees, or  to  a  corporation,  according  to  the  terms  of  such  re- 


Appendix.  563 

quest,  and  in  the  manner  stated  therein,  being  first  duly 
indemnified  for  any  outstanding  obligation,  and  said  trustees 
upon  filing  in  said  registry  of  deeds  a  certificate  that  they  have 
complied  with  such  request  shall  be  under  no  further  liability. 
In  case  this  trust  expires  by  the  above  limitation  without 
action  relative  thereto  by  the  shareholders,  said  trustees  shall 
sell  all  property  then  held  by  them  as  such  and  divide  the 
proceeds  among  the  shareholders. 

15.  Said  trustees  shall  be  responsible  only  for  a  willful 
breach  of  trust,  and  each  shall  be  responsible  only  for  his  own 
acts. 

16.  Meetings  of  the  shareholders  may  be  called  by  any  two 
of  the  trustees  and  shall  be  called  upon  the  written  request 
of  five  or  more  shareholders.  The  shareholders  may  for  their 
own  government  pass  by-laws  and  elect  necessary  officers,  and 
may  instruct  the  trustees  herein  on  any  manner  not  inconsistent 
with  the  powers  herein  or  hereafter  given  said  trustees,  or 
with  the  acquired  rights  of  third  parties.  The  vote  or  agree- 
ment in  writing  of  three- fourths  in  value  of  the  shareholders 
shall  be  binding  upon  all  and  upon  the  trustees  and  this  agree- 
ment may  be  altered  or  added  to  accordingly,  but  the  rights 
of  third  persons  shall  not  be  aff"ected,  nor  shall  any  third  per- 
son be  deemed  to  have  notice  thereof,  until  a  certificate  setting 
forth  such  vote  or  agreement,  signed  by  a  majority  of  the 
trustees  and  duly  acknowledged,  shall  be  recorded  in  the 
registry  of  deeds  for  the  county  of  Sufifolk  and  such  certifi- 
cate shall  be  conclusive  as  to  the  validity  of  the  vote  certified 
and  all  facts  therein  stated.  A  like  certificate  so  recorded 
shall  also  be  conclusive  as  to  all  facts  affecting  title. 

In  witness  whereof,  we  have  hereunto  set  our  hands  and 
stated  the  amount  of  our  respective  subscriptions  on  the  day 
and  year  above  written. 


564  Trusts  for  Business  Purposes. 

(Signed  by  the  trustees  and  by  subscribers  for  shares  to 
the  aggregate  amount  of  $2,000,000.) 

WARREN  CHAMBERS  AGREEMENT  AND  DECLARA- 
TION OF  TRUST. 

An  agreement  and  declaration  of  trust  made  by  the  sub- 
scribers, this  twenty-sixth  day  of  June  A.  D.  1895,  for  the 
purpose  of  purchasing  certain  real  estate  on  Boylston  street 
in  the  city  of  Boston  and  being  the  lots  on  which  are  now 
the  buildings  numbered  413,  415  and  421  on  said  street  and 
erecting  thereon  a  suitable  building  for  the  occupation  of  doc- 
tors, dentists,  oculists  and  others. 

I.  The  trustees  under  this  agreement  are  authorized  as 
such  trustees  to  purchase  said  premises  and  any  existing  leases 
thereof  and  to  proceed  to  the  erection  of  a  new  building 
thereon  as  soon  as  practicable  and  may  as  such  trustees  make 
all  necessary  contracts  and  agreements  for  such  purchase  and 
for  such  new  building,  including  any  agreement  they  may 
think  advisable  for  straightening  or  altering  boundaries,  and 
may  if  they  deem  expedient,  for  the  adjustment  of  boundaries 
acquire  additional  adjoining  estate  or  release  portions  of  the 
trust  estate.  They  may  at  any  time  procure  the  discharge  or 
release  of  any  mortgages,  now  existing  on  the  whole  or  any 
part  of  said  premises  on  such  terms  as  they  deem  expedient, 
and  they  may  at  any  time  mortgage  the  whole  or  any  part 
of  said  premises  and  the  buildings  they  may  erect  thereon, 
for  an  amount  not  exceeding  in  all  two  hundred  and  fifty 
thousand  (250,000)  dollars,  upon  such  terms  and  for  such 
time  as  they  may  think  best  and  may  make  leases  of  the 
property  or  any  part  thereof  held  by  them  on  such  terms 
as  they  think  best.  After  the  new  building  is  completed,  the 
trustees  shall  incur  no  debt  or  liability  except  such  as  may 


Appendix.  565 

be  incidental  to  the  management  of  the  property  held  by 
them  and  then  only  for  an  amount  not  exceeding  in  the 
aggregate  at  any  one  time  ten  thousand  (10,000)  dollars. 
The  trustees  shall  have  no  power  to  bind  the  shareholders 
personally  and  in  every  written  contract  they  shall  enter  into 
reference  shall  be  made  to  this  declaration  of  trust  and  the 
person  or  corporation  contracting  with  the  trustees  shall  look 
to  the  funds  and  property  of  the  trust  for  the  payment  under 
such  contract,  or  for  the  payment  of  any  debt,  mortgage, 
judgment  or  decree  or  of  any  money  that  may  otherwise  be- 
come due,  or  payable  by  reason  of  the  failure  on  the  part  of 
said  trustees  to  perform  such  contract  in  whole. or  in  part, 
and  neither  the  trustees  nor  the  shareholders  present  or  future 
in  this  company  shall  be  personally  liable  therefor. 

2.  The  title  of  the  trustees  shall  be  "Trustees  of  the  War- 
ren Chambers"  and  any  property  conveyed  to  them  under 
that  description  shall  be  held  by  them  in  trust  under  this  agree- 
ment. 

3.  The  trustees  shall,  if  so  instructed  by  the  shareholders 
as  hereinafter  provided,  take  such  action  as  they  may  deem 
best  for  the  purpose  of  obtaining  a  charter  for  a  corporation 
for  the  purposes  aforesaid. 

4.  The  trustees  shall  give  receipts  for  installments  on  sub- 
scriptions when  paid  and  when  so  much  of  the  subscriptions 
shall  have  been  paid  as  to  the  trustees  seem  necessary,  they 
shall  issue  certificates  of  shares  in  exchange  for  such  re- 
ceipts. Such  receipts  and  certificates  shall  be  transferable 
only  on  the  books  of  the  trustees  upon  surrender  thereof,  all 
installments  due  having  first  been  paid,  and  the  acceptance 
of  a  receipt  or  certificate  shall  make  the  person  named  therein 
a  party  to  this  agreement.     The  term  "shareholder"  used  in 


566  Trusts  for  Business  Purposes. 

this  agreement  shall  mean  holder  of  record  of  a  receipt  or  a 
certificate  for  one  or  more  shares. 

5.  In  addition  to  their  reasonable  and  proper  expenses 
incurred  in  the  management  of  the  trust,  the  trustees  shall 
be  paid  at  the  rate  of  three  thousand  (3,000)  dollars  per 
annum,  from  August  i,  1895,  until  the  new  building  is  com- 
pleted and  thereafter  at  the  rate  of  fifteen  hundred  (1,500) 
dollars  per  annum  to  be  divided  among  them  as  they  may 
agree. 

6.  Said  trustees  may  appoint  such  officers  and  agents  as 
they  may  think  best,  fix  their  compensation  and  define  their 
duties. 

7.  When  any  trustee  is  absent  from  the  commonwealth 
or  incapable  for  any  reason  of  acting  as  said  trustee,  the 
other  trustees  shall  have  all  the  powers  hereunder  provided 
that  in  no  case  shall  less  than  two  trustees  actually  exercise 
the  powers  hereunder. 

8.  All  taxes  and  assessments  during  construction,  together 
with  interest  at  the  rate  of  four  per  cent,  per  annum,  shall 
be  added  to  the  cost  of  the  building,  which  interest  shall  be 
paid  semiannually  to  the  subscribers  from  the  date  of  their 
respective  payments  of  subscriptions  until  the  substantial  com- 
pletion of  said  building.  After  the  completion  of  said  building, 
the  trustees  shall  make  such  dividends  among  the  shareholders 
as  they  may  deem  expedient.  The  cost  of  said  building 
shall  also  include  the  sum  of  ten  thousand  (10,000)  dollars 
to  be  paid  to  John  B.  Thomas  and  Edwin  Read  for  their 
services  and  expenses  in  promoting  this  enterprise  and  pro- 
curing subscriptions  to  this  agreement. 

9.  The  trustees  shall  call  meetings  of  the  shareholders 
annually  on  the  second  Thursday  in  February,  and  shall  re- 
port their  receipts  and  expenses  for  the  year  ending  on  the 


Appendix,  567 

thirty-first  of  December  preceding.  They  may  call  special 
meetings  of  the  shareholders  at  any  time  and  shall  do  so  upon 
the  written  request  of  the  holders  of  one-tenth  of  the  shares. 

10.  Notices  of  meetings,  of  calls  for  payments  of  subscrip- 
tions, or  for  any  other  purpose,  shall  be  deemed  binding  upon 
each  subscriber  and  shareholder  if  mailed  prepaid  to  the  last 
address  given  by  him  to  the  trustees,  or  in  default  thereof  to 
his  last  known  place  of  business  or  abode.  Notices  of  meet- 
ings shall  be  given  five  days  beforehand  and  may  be  given  by 
advertisement  for  two  successive  days  in  two  daily  papers 
published  in  said  Boston  or  by  mail  at  the  option  of  the  trus- 
tees. In  notices  of  special  meetings  the  purpose  therefor 
shall  be  stated. 

11.  Shareholders  may  vote  by  proxy,  being  entitled  to  one 
vote  for  each  share.  At  any  annual  meeting  or  special  meet- 
ing called  for  that  purpose,  the  holders  of  a  majority  of  the 
entire  number  of  shares  may  fill  any  vacancy  existing  in  the 
number  of  trustees,  may  remove  any  or  all  of  the  trustees 
and  elect  others  in  their  place,  may  authorize  a  sale  or  addi- 
tional mortgage  of  the  real  estate,  or  any  part  thereof,  held 
by  the  trustees,  may  authorize  or  instruct  the  trustees  to  pur- 
chase and  build  upon  additional  real  estate  and  issue  addi- 
tional shares  for  that  purpose  anl  may  alter  or  amend  this 
declaration  of  trust  or  substitute  a  new  one  in  place  hereof. 
For  all  other  purposes  at  such  meetings  five  shareholders 
representing  one  fifth  of  all  the  shares  shall  constitute  a 
quorum.  No  such  alterations  or  amendments  of  or  substitu- 
tion for  this  agreement  or  removal  or  appointment  of  trustees 
shall  afifect  any  person  not  having  actual  notice  thereof  un- 
til recorded  in  registry  of  deeds,  for  Sufifolk  county,  nor  shall 
any  such  alteration  or  amendment  or  other  action  afifect  rights, 
previously  acquired,  of  any  third  person.    A  certificate  signed 


568  Trusts  for  Business  Purposes. 

by  the  chairman  of  such  meeting  shall,  if  countersigned  by 
at  least  one  of  the  trustees,  be  conclusive  evidence  of  the 
regularity  of  the  meeting  and  of  the  vote  having  been  passed 
by  the  requisite  majority  and  of  all  facts  stated  in  such  vote 
or  certificate  material  to  title. 

12.  Any  vacancy  in  the  number  of  trustees  may  be  filled 
by  the  remaining  trustees,  until  the  next  annual  meeting  of 
the  shareholders  or  special  meeting  called  for  the  purpose  of 
filling  such  vacancy.  The  acting  trustees  from  time  to  time 
shall  have  all  the  powers  of  original  trustees.  Upon  resig- 
nation, decease,  removal  or  vacancy  for  any  cause,  the  title 
of  the  outgoing  trustees  shall  vest  in  the  remaining  trustees 
and  upon  the  filling  of  any  vacancy  as  aforesaid  the  title  of 
the  whole  trust  property  shall  vest  in  the  new  board  jointly. 

13.  No  sale  or  mortgage  for  any  amount  exceeding  two 
hundred  and  fifty  thousand  (250,000)  dollars  of  the  real 
estate  hereinbefore  described  or  any  part  thereof  shall  be 
made  by  the  trustees  unless  authorized  by  vote  of  the  share- 
holders as  provided  above,  except  that  the  trustees  may  trans- 
fer all  the  property  held  by  them  to  a  corporation  chartered, 
as  provided  in  section  3  of  this  instrument  or  sell  all  such 
property  at  the  expiration  of  the  trust  in  default  of  action 
relative  thereto  by  the  shareholders. 

14.  This  trust  shall  not  continue  in  any  event  longer  than 
twenty  years  after  the  death  of  the  last  surviving  subscriber 
hereto. 

15.  No  bond  shall  ever  be  required  of  any  trustee  hereun- 
der and  each  trustee  shall  be  liable  only  for  his  own  acts  and 
then  only  for  willful  breach  of  trust. 

16.  Any  paper  signed  by  the  trustees  or  any  of  them  or 
by  the  shareholders,  or  a  copy  of  the  record  of  any  of  their 
proceedings  certified  by  any  one  of  the  trustees,  which  it  may 


Appendix,  569 

be  deemed  desirable  to  record  in  the  registry  of  deeds  for  the 
county  of  Suffolk  may  be  acknowledged  by  any  one  of  the 
trustees  in  the  manner  prescribed  for  the  acknowledgment 
of  deeds  in  Massachusetts. 

17.  The  whole  number  of  shares  of  this  trust  shall  be 
thirty-five  hundred  (3,500)  which  shall  represent  all  the  prop- 
erty of  said  trust,  subject  to  such  mortgages  as  may  be  made 
by  the  trustees  under  the  powers  hereinbefore  set  forth. 

18.  We,  the  subscribers  agree  to  take  the  number  of  shares 
set  against  our  names  respectively  and  to  pay  to  the  trustees 
therefor  such  amount,  not  exceeding  one  hundred  (100)  dol- 
lars for  each  share,  as  the  trustees  shall  call  for,  in  such 
installments  and  at  such  times  as  the  trustees  may  require 
and  in  case  any  subscriber  neglects  to  pay  any  installment 
required  by  the  trustees,  in  twenty  days  after  notice,  the 
amount  of  his  subscription  then  unpaid  may  be  canceled  at 
the  option  of  the  trustees  who  may  accept  another  subscriber 
in  his  place. 

19.  The  first  trustees  under  this  agreement  shall  be  Francis 
Peabody,  Jr.,  Alfred  Bowditch,  both  of  Boston,  and  Emor 
H.  Harding,  of  Milton,  all  in  the  commonwealth  of  Massa- 
chusetts, who  signify  their  acceptance  of  the  trusts  by  sub- 
scribing their  names  hereto. 

Francis  Peabody,  Jr.     (Seal.) 
Alfred  Bowditch.  (Seal.) 

Emor  H.  Harding.         (Seal.) 
(Signatures    of    subscribers    for    an    aggregate    of    3,500 
shares.) 


570  Trusts  for  Business  Purposes. 

AMERICAN  MANUFACTURING  COMPANY. 

A  decision  in  reference  to  this  trust  is  reported  in  tlie 
chapter  on  Validity — Rights  Distinguished  from  Law, 
Kinross  v.  Cooper.  In  this  connection  see  also  chapters — 
Rule  Against  Perpetuities  and  Difference  Between  Trust 
and   Partnership. 

Tpiis  Agreement  and  Declaration  of  Trust,  made  this 
30th  day  of  October,  A.  D.  1918,  by  and  between  John  W. 
Kinross,  Geo.  A.  Caldwell,  John  A.  Hoblit,  S.  W.  Gasaway, 
Wm.  Seefeldt,  Wm.  G.  Peters  and  Wm.  J.  Peck,  together 
with  their  assigns,  herein  designated  as  "Subscribers",  and 

John  W.  Kinross,  Geo.  A.  Caldwell,  John  A.  Hoblit,  S.  W. 
Gasaway  together  with  their  successors,  herein  designated  as 
"trustees",  WITNESSETH : 

Whereas,  it  is  desired  by  the  subscribers  hereto  and  their 
assigns,  and  such  others  as  may  become  shareholders  here- 
under, to  engage  in  the  business  hereinafter  set  forth,  and  to 
contribute  therefor  property  or  otherwise,  for  their  interest 
therein  as  set  forth  by  the  number  of  shares  set  opposite  the 
name  of  each  subscriber  respectively;  and 

Whereas,  it  is  desired  by  the  subscribers  that  the  said 
persons  named  as  trustees  herein  shall  act  as  trustees  under 
the  terms  and  conditions  set  forth  herein  for  the  purpose  of 
carrying  on  the  business,  and  withholding  all  property  which 
may  come  into  their  hands  as  Trustees  aforesaid;  and 

Whereas,  the  said  persons  herein  named  as  trustees  are 
willing  to  account  to  the  said  subscribers  as  hereinafter  set 
forth  and  upon  the  following  terms  and  conditions : 

Now,  Therefore,  the  Trustees  hereby  declare  that  they 
will  hold  the  property  and  funds  to  be  transferred  to  them, 
as  well  as   other  property  which  they  may  acquire  as   trus- 


Appendix.  57^ 

tees,  together  with  the  proceeds  thereof,  in  trust,  that  they 
will  engage  such  property  and  funds  in  the  Manufacture  and 
Sale  of  Tractors,  Agricultural  Implements  and  Other 
Devices,  and  in  the  transaction  of  other  business  incidental 
thereto ; 

a.  To  acquire  in  any  manner  whatsoever,  and  to  hold,  own, 
lease,  rent,  maintain,  improve,  work,  develop,  and  generally 
to  deal  in  and  with  real,  personal,  and  mixed  property,  and 
all  interest  or  rights  therein  or  incident  thereto,  without  limi- 
tation as  to  amount  or  situation ; 

b.  To  acquire  by  purchase  or  otherwise,  and  to  hold,  own, 
mortgage,  hypothecate,  pledge,  exchange,  sell,  and  generally 
to  deal  in  stocks,  shares,  bonds,  notes  and  other  securities 
of  every  nature  whatsoever ; 

c.  To  lease,  rent,  maintain,  and  improve,  develop,  sell, 
pledge,  exchange,  mortgage,  hypothecate,  or  otherwise  dispose 
of  any  property  of  any  kind ; 

d.  To  engage  in  the  business  of  a  manufacturer  and  seller 
of  Tractors,  Agricultural  Implements,  and  other  devices, 
to  buy,  sell  and  manufacture  the  same,  and  generally  deal  in 
all  products,  machinery,  raw  material,  partly  finished  and  fin- 
ished material,  appliances,  devices,  and  methods  used  by  them 
in  connection  with  their  business,  and  to  engage  in  a  business 
or  industry  whatsoever,  whether  specified  herein  or  not  ; 

e.  To  acquire  in  any  manner  whatsoever,  and  to  hold, 
own,  sell,  assign,  convey,  lease,  rent,  or  otherwise  deal  in 
real  estate  and  personal  property,  and  any  and  all  things  re- 
lating to  or  useful  in  connection  with  the  business  of  the 
trust ; 

f.  To  apply  for,  obtain,  register,  purchase,  lease,  or  to 
otherwise  acquire,  and  to  own,  hold,  use,  operate,  introduce, 
and  to  sell,  assign,  or  otherwise  dispose  of,  any  trade-marks, 


572  Trusts  for  Business  Purposes. 

trade-names,  patents,  inventions,  improvements  or  processes 
used  in  connection  with  or  secured  by  or  under  letters  patent 
of  the  United  States  or  elsewhere,  or  otherwise,  and  use, 
exercise,  develop,  grant  license  in  respect  to,  or  otherwise 
turn  to  account,  any  such  trade-marks,  trade-names,  patents, 
licenses,  process  and  the  like,  of  any  such  property  or  rights ; 
g.  To  advertise  and  otherwise  exploit  their  goods  and 
methods,  to  manage,  control  or  dispose  of  the  same  in  any 
part  of  the  world  for  the  benefit  and  profit,  from  time  to  time, 
of  the  certificates  of  shares  issued  hereunder,  according  to 
the  priorities  expressed  in  said  certificates,  and  in  the  man- 
ner and  subject  to  the  stipulations  herein  contained;  to  wit: 

Article  I. 

1.  The  trustees  in  their  collective  capacity,  shall  be  desig- 
nated, so  far  as  possible  and  practicable,  as  the  American 
Manufacturing  Company,  and  under  that  name  shall,  so 
far  as  practicable,  conduct  all  business  and  execute  all  in- 
struments in  writing  in  performance  of  their  trust, 

2.  The  trustees  shall  be  four  in  number  and  shall  be  cer- 
tificate holders.  Their  number  may  be  increased  or  diminished 
at  any  annual  meeting  of  the  shareholders,  or  at  any  special 
meeting  called  for  that  purpose. 

3.  Of  the  trustees  herein  mentioned  by  name,  John  W. 
Kinross  and  John  A.  Hoblit  shall  hold  office  until  the  third 
annual  meeting  of  the  shareholders ;  Geo.  A.  Caldwell  shall 
hold  office  until  the  second  annual  meeting  of  the  sharehold- 
ers ;  Wm.  J.  Peck  shall  hold  office  until  the  first  annual  meet- 
ing of  the  shareholders;  except  that  said  trustees,  as  well  as 
other  trustees  hereinafter  elected,  shall  in  all  cases  hold  office 
until  their  successors  have  been  elected  and  accepted  this  trust. 


Appendix.  573 

4.  The  shareholders  shall  at  each  annual  meeting,  or  ad- 
journment thereof,  elect  one  or  more  trustees,  as  the  case  may 
be,  to  serve  for  the  term  of  three  years  next  ensuing. 

a.  In  case  of  death,  resignation  or  inability  to  act  of  any 
of  the  trustees,  the  remaining  trustees  shall  accept  any  resig- 
nation and  fill  the  vacancy  for  the  unexpired  term. 

5.  As  soon  as  any  trustee  elected  by  the  shareholders,  or 
by  the  remaining  trustees  to  fill  a  vacancy,  shall  have  accepted 
this  trust,  the  trust  estate  shall  vest  in  the  new  trustee,  or 
trustees,  without  any  further  act  or  conveyance. 

Article;  II. 

I.  The  trustees  shall  hold  the  legal  title  to  all  property 
at  any  time  included  in  the  trust  estate,  and  said  property 
shall  be  held  by  the  Trustees  as  joint  tenants,  and  not  as 
tenants  in  common,  in  trust  for  all  the  certificate  holders  in 
proportion  to  their  respective  interests  as  represented  by  the 
certificates  of  shares. 

a.  The  trustees  shall  have  the  absolute,  control,  manage- 
ment and  disposition  of  all  of  the  trust  estate,  and  shall  like- 
wise have  the  absolute  control  and  conduct  of  all  its  business, 
and  shall  without  further  authority  from  the  shareholders 
possess  every  power  which  they  deem  necessary  or  proper  to 
execute  the  purposes  of  the  trust. 

b.  They  shall  assume  all  contracts  for  and  obligations  and 
liabilities  in  connection  with,  or  growing  out  of  the  purchase 
of  the  property  assigned  to  them  by  the  subscribers,  and  to 
the  extent  and  value  of  such  property,  but  not  personally 
and  shall  agree  to  hold  the  subscribers  and  any  persons  asso- 
ciated with  them,  harmless  and  indemnified  from  and  against 
loss,  cost,  expense  or  liability  upon  by  reason  of,  or  in  con- 
nection with  any  such  contract,  obligation  or  liability. 


574  Trusts  i^or  Business  Purposes. 

c.  They  may  adopt  and  use  a  common  seal;  they  shall 
have  power  to  vote  in  person  or  by  proxy  upon  all  shares  of 
stock,  bonds,  mortgages,  debentures,  deeds  or  other  written 
evidence  of  property  rights  belonging  to  the  trust,  and  may 
collect,  receive  and  receipt  for  all  dividends  thereon; 

d.  They  may  contract  with  companies,  corporations  or  in- 
dividuals in  respect  to  any  matters  relating  to  the  operation 
of  the  business ; 

e.  They  may  collect,  sue  for,  receive  and  receipt  for  all 
sums  of  money  at  any  time  coming  to  said  trust; 

f.  They  may  employ  counsel  to  begin,  prosecute,  defend 
or  settle  suits  at  law.  in  equity  or  otherwise,  and  to  compro- 
mise or  refer  to  arbitration  any  claim  in  favor  of  or  against 
any  trust; 

g.  They  shall  have  power  to  improve  and  develop  all  prop- 
erty which  may  become  a  part  of  the  trust  estate,  by  the 
erection  of  building,  or  otherwise,  as  they  shall  deem  proper, 
and  to  repair  or  rebuild  any  buildings ;  or  let,  exchange  or 
lease  the  whole  or  any  part  or  parts  of  the  trust  estate, 

h.  They  may  issue  bonds,  debentures,  deeds,  mortgages  or 
other  obligations  from  time  to  time  for  the  purpose  of  the 
trust,  and  to  secure  the  same  by  mortgage,  deed  or  trust  or 
otherwise ; 

i.  They  may  make  loans  and  advances  of  money  upon 
open  account  or  promissory  notes,  or  other  evidence  of  in- 
debtedness, secured  or  unsecured ; 

j.  ]\Iay  borrow  money  in  such  amounts,  for  such  times  and 
upon  such  terms,  and  upon  such  occasions  as  may  be  con- 
sidered to  the  best  interest  of  the  trust  estate; 

1.  They  may  also  by  a  majority  vote  at  a  meeting  called 
for  that  purpose,  but  not  otherwise,  exchange,  upon  such 
terms  as  they  may  agree,  the  stock  or  securities  held  by  them 


Appendix,  575 

in  any  corporation  or  company,  for  the  stock  or  securities  of 
any  other  corporation  or  company,  by  consoHdation  or  other- 
wise ; 

m.  May  loan  money  to  any  corporation,  company  or  indi- 
vidual or  may  own,  buy,  sell  or  hold  the  capital  stock  or 
bonds  of  any  corporation  or  company,  and  may  subscribe  for 
or  acquire  the  capital  stock  of  any  corporationoor  company 
doing  a  like  business. 

n.  The  trustees  may  sell,  mortgage,  pledge,  encumber  or 
dispose  of  any  shares  of  stock,  securities  or  other  property 
from  time  to  time  held  by  them,  upon  such  terms  and  for 
such  purposes  as  they  may  approve; 

o.  They  may  borrow  money  for  the  purpose  incidental  to 
the  proper  management  and  conduct  of  the  trust,  and  may 
pledge  the  property  of  said  trust  in  such  manner  as  they  may 
deem  best  to  secure  said  loans,  but  said  borrowings  shall  not 
exceed  in  the  aggregate  $50,000.00  and  they  shall  incur  no 
debt  or  liability  except  such  as  may  be  incidental  to  the 
proper  management  of  the  property  held  by  them  and  to  the 
proper  carrying  out  of  their  trust. 

p.  The  trustees  may  make  a  general  assignment  of  the 
assets  of  the  trust  for  the  benefit  of  the  creditors  of  the  said 
trust,  when  in  the  opinion  of  the  Trustees  occasion  may  de- 
mand, and  such  assignment  shall  be  binding  upon  the  certificate 
holders  hereunder. 

2.  So  far  as  strangers  to  this  trust  are  concerned,  a  reso- 
lution of  the  trustees  authorizing  a  particular  act  to  be  done, 
shall  be  conclusive  evidence  in  favor  of  such  strangers  that 
such  act  is  within  the  powers  of  the  trustees,  and  no  pur- 
chaser from  the  trustees  shall  be  bound  to  see  the  application 
of  the  purchase  money,  or  other  consideration  paid  or  deliv- 
ered by  or  for  said  purchaser  to  or  for  said  trustees. 


576  Trusts  for  Business  Purposes. 

Article  III. 

1.  The  trustees  may  hold  meetings  in  such  places  and  at 
such  times  as  they  may  determine,  and  stated  meetings  shall 
be  held  from  time  to  time  upon  the  call  of  the  President  or 
a  majority  of  the  trustees. 

a.  A  majority  of  the  Board  constitutes  a  quorum,  and  the 
concurrence  of  all  the  trustees  shall  not  be  necessary  to  the 
validity  of  any  action  done  by  them,  but  the  wish  of  the 
majority  present  and  by  voting  shall  be  conclusive  evidence, 
except  as  herein  specifically  provided. 

2.  The  trustees  may  make,  adopt,  amend  or  repeal  such 
by-laws,  rules  and  regulations,  not  inconsistent  with  the  terms 
in  this  instrument,  as  they  may  deem  necessary  or  desirable 
for  the  conduct  of  their  business,  or  for  the  government  of 
themselves,  their  servants,  agents  or  representatives. 

Article  IV. 

I.  The  trustees  shall  annually  elect  from  among  their  num- 
ber a  President  and  Secretary  of  the  Board,  and  may  also 
annually  elect  or  appoint  either  from  among  their  number 
or  from  among  the  shareholders,  a  Vice-President  and  Treas- 
urer ; 

a.  They  shall  have  authority  to  appoint  such  other  of- 
ficers, agents,  attorneys  or  employees,  as  they  may  from  time 
to  time  deem  necessary  or  expedient  for  the  conduct  of  their 
business ; 

b.  They  shall  have  authority  to  accept  resignations,  and  to 
fill  any  vacancies  in  the  offices  of  President,  Vice-President, 
Secretary  and  Treasurer  for  the  unexpired  term,  and  shall 
likewise  have  authority  to  elect  temporary  officers  to  serve 
during  the  absence  or  disability  of  regular  officers. 


Appendix.  577 

2.  The  president  shall  preside  at  all  meetings  of  the 
trustees,  shall  sign  all  certificates  and  any  instrument  which 
he  may  be  required  to  execute  in  the  name  of  the  company, 
and  perform  such  other  duties,  and  hold  office  for  such 
period  as  may  be  determined  by  the  trustees,  or  provided  for 
in  the  by-laws. 

a.  The  Vice-President,  or  Vice-Presidents,  shall  perform 
the  duties  of  the  President  in  event  of  his  death,  absence  or 
incapacity,  and  perform  and  render  such  other  services  as  may 
be  prescribed  or  required  by  the  trustees. 

b.  The  Secretary  shall  countersign  all  said  certificates,  and 
shall  attend  all  meetings  of  the  certificate  holders  and  of  the 
trustees  and  keep  the  minutes  of  such  meetings;  he  shall  keep 
such  records  and  books  and  render  such  services  as  may  be 
prescribed,  or  be  imposed  upon  him  from  time  to  time  by  the 
trustees. 

c.  The  trustees  may  in  their  discretion,  entrust  the  pos- 
session, care  or  custody  of  any  moneys  or  other  property 
of  the  trust  estate,  to  the  Treasurer  or  other  officer,  agent  or 
employees,  and  the  trustees  shall  not  be  personally  liable  or 
responsible  for  the  fault  of  any  officer,  agent  or  employee. 

d.  The  Treasurer  shall  perform  all  duties  usually  incident 
to  such  position,  and  such  as  may  be  prescribed,  or  recjuired 
from  time  to  time  by  the  trustees. 

3.  The  trustees  shall  fix  the  compensation  of  any  or  all 
officers  and  agents  whom  they  may  appoint,  and  are  likewise 
authorized  to  pay  to  themselves  such  compensation  for  their 
services  as  they  shall  deem  reasonable. 

4.  The  trustees  shall  not  be  liable  for  errors  of  judgment, 
either  in  holding  property  originally  conveyed  to  them,  or  in 
acquiring  and  afterward  holding  additional  property,  nor  for 
any  loss  arising  out  of  any  investment,  nor  for  any  act  or 


578  Trusts  for  Business  Purposes. 

omission  to  act,  perform  or  omitted  by  them  in  the  execution 
of  this  trust  in  good  faith,  nor  shall  they  be  Hable  for  the 
acts  and  omissions  of  each  other,  or  of  any  officer,  agent, 
servant  or  person  appointed  by  them  or  acting  for  them,  and 
they  shall  not  be  obliged  to  give  bond  to  secure  the  perform- 
ance of  this  trust  by  them. 

Article  V. 

1.  The  trustees  shall  issue  certificates  in  the  trust  estate 
for  the  par  value  of  One  Hundred  Dollars,  to  the  persons 
contributing  the  trust  estate  in  proportion  to  their  contribu- 
tions respectively ;  such  certificates  in  the  aggregate  not  to 
exceed  Three  Hundred  Thousand  Dollars  ($300,000.00)  said 
issue  to  be  made  in  the  discretion  of  the  trustees  for  cash 
or  such  other  property. 

2.  As  evidence  of  the  ownership  of  such  shares,  the  trus- 
tees shall  cause  to  be  issued  for  each  shareholder  a  negotiable 
certificate,  which  shall  be  in  form  of: 

NUMBER      DECLARATION  OF  TRUST.      SHARE 
AMERICAN    MANUFACTURING    COMPANY 
Capitalization  $300,000.00 
Par  Value  $100.00 

This    Certifies    That is    the    holder    of 

Shares  of  the  Capital  of  the  American  Manu- 
facturing Company,  fully  paid  and  non-assessable,  sub- 
ject to  Declaration  of  Trust  in  favor  of  said  Organization 
dated  the day  of  October  A.  D.  1918,  and  re- 
corded in  the  office  of  the  Recorder  of  Deeds  of 

County,  Illinois,  and  transferable  only  on  such  books  of 
the  organization  in  person  or  by  attorney  upon  surrender 
of  this  Certificate  properly  endorsed. 

In    Witness    Whereof,    the    said    Organization    has 
caused  this  Certificate  to  be  signed  by  its  duly  authorized 

officers  and  its  seal  to  be  hereto  affixed  this day 

of A.  D.  19 

Secretary.  President. 


Appendix.  579 

(Endorsement  on  Back  of  Certificate) 

For   Value  Received... hereby   sell,   assign 

and  transfer  unto Shares  of  the  Capital  repre- 
sented by  the  within  Certificate,  and  do  hereby  irrevocably 

constitute   and   appoint Attorney   to   transfer 

the  said  shares  on  the  books  of  the  within  named  organ- 
ization, with  full  power  to  substitute  in  the  Premises. 

Dated 19.  .  .  . 

Presence  of 


Article  VI. 

1.  The  trustees  may  issue  and  sell  at  public  or  private 
sale,  and  upon  such  terms  and  conditions,  and  for  such  prices 
as  they  may  deem  expedient,  the  shares  hereunder. 

a.  The  Trustees  may  also,  from  time  to  time,  with  the 
consent  of  the  majority  of  the  shareholder,  issue  such  addi- 
tional shares  (in  addition  to  the  original  capital  hereinbefore 
provided)  of  such  par  value  and  in  such  numbers  as  they 
may  deem  necessary  to  provide  added  means  to  carry  on  the 
business  of  the  trust,  and  they  may  sell  such  added  shares  at 
private  or  public  sale,  upon  such  terms  and  conditions  and  at 
such  prices  as  they  may  deem  expedient. 

2.  In  case  of  loss  or  destruction  of  any  certificate  of  shares 
issued  by  the  trustees,  the  trustees  may,  under  such  condi- 
tions as  they  may  deem  expedient,  issue  new  certificates  in 
place  of  those  lost  or  destroyed. 

3.  The  trustees  may  from  time  to  time  declare  and  pay 
dividends  out  of  net  earnings  from  time  to-  time  received  by 
them,  but  the  amount  of  such  dividends  and  payment  of  them 
shall  be  wholly  in  the  discretion  of  the  trustees. 

Article  VII. 
I.     The  fiscal  year  of  the  trustees   shall  end  on  the  31st 


580  Trusts  for  Business  Purposes. 

day  of  December  in  each  year.  Annual  meetings  for  the  elec- 
tion of  trustees,  and  for  the  transaction  of  other  business 
shall  be  held  in county,  Illinois,  on  the  first  Mon- 
day of January,  in  each  year,  beginning  with  year 

1919,  of  which  meeting  notice  shall  be  given  by  the  Secretary 
by  mail,  to  each  shareholder,  at  his  or  her  registered  address, 
at  least  ten  days  before  such  meeting, 

2.  Special  meetings  of  the  shareholders  shall  be  held  any 
time  upon  seven  days  notice  given  as  above  stated,  when 
ordered  by  the  President  or  a  majority  of  the  trustees.  At 
all  meetings  of  the  shareholders,  each  holder  of  shares  shall 
be  entitled  to  one  vote  for  each  share  held  by  him,  and  any 
shareholder  may  vote  by  proxy. 

3.  No  business  except  to  adjourn  shall  be  transacted  at  any 
meetings  of  the  shareholders,  unless  a  majority  of  all  the 
shares  outstanding  are  present  in  person  or  proxy. 

4.  All  questions  before  the  meeting  at  which  a  quorum  is 
present  shall  be  determined  by  a  majority  vote  of  the  shares 
entitled  to  vote  thereat. 

Article  VIII. 

1.  The  death  of  a  shareholder  or  a  trustee  during  the 
continuance  of  this  trust  shall  not  operate  to  determine  the 
trust,  nor  shall  it  entitle  the  representative  of  the  deceased 
shareholder  to  an  accounting,  or  to  take  action  in  the  Courts 
or  elsewhere,  against  the  trustees,  but  the  executors,  adminis- 
trators or  assigns  of  any  deceased  shareholder  shall  succeed 
to  the  rights  of  said  decedent  under  this  trust,  upon  surrender 
of  the  certificate  for  the  shares  owned  by  him. 

2.  The  ownership  of  shares  hereunder  shall  not  entitle 
the  shareholder  to  any  title  in  or  to  the  trust  property  what- 


Appendix.  581 

soever,  or  the  right  to  call  for  a  partition  or  division  of  the 
same,  or  for  an  accounting. 

Article  IX. 

1.  The  trustees  shall  have  no  power  to  bind  a  shareholder 
personally,  and  the  subscribers  and  their  assigns  and  all  per- 
sons and  corporations  extended  credit  to,  contracted  with  or 
having  any  claim  against  the  trustees,  shall  look  only  to  the 
funds  of  and  the  property  of  the  trust  for  payment  under  such 
contract  or  claim,  or  for  the  payment  of  any  debt,  damage, 
judgment,  or  any  money  that  may  otherwise  become  due  or 
payable  to  them  from  the  trustees,  so  that  neither  the  trustees 
nor  the  shareholders,  present  or  future,  shall  be  personally 
liable  therefor. 

2.  In  every  written  contract,  order  or  obligation  which 
the  trustees  shall  give  or  enter  into,  it  shall  be  the  duty  of 
the  trustees  to  stipulate  that  neither  the  trustees  nor  the 
shareholders  shall  be  personally  liable  by  reason  of  such  order, 
contract  or  obligation. 

3.  The  accounts  and  books  of  the  trustees  or  any  of  them, 
shall  be  open  to  inspection  of  the  shareholders  at  all  reason- 
able times. 

Article  X. 

I.  This  trust  shall  continue  for  the  term  of  twenty-five 
years,  at  which  time  the  then  Board  of  Trustees  shall  pro- 
ceed to  wind  up  its  affairs,  liquidate  its  assets,  and  distribute 
the  same  among  the  holders  of  the  shares  according  to  their 
respective  interests  as  represented  by  the  certificates;  Pro- 
vided, However,  that  if  prior  to  the  expiration  of  this  period, 
the  holders  of  at  least  two-thirds  of  the  shares  then  outstand- 


582  Trusts  for  Business  Purposes. 

ing  shall,  at  a  meeting  called  for  that  purpose  vote  to  ter- 
minate or  continue  the  trust,  then  said  trust  shall  either 
terminate  or  continue  for  such  further  period  as  may  then  be 
determined. 

2.  For  the  purpose  of  winding  up  their  affairs  and  liqui- 
dating the  assets  of  the  trust,  the  then  Board  of  Trustees 
shall  continue  in  office  until  such  duties  have  been  fully  per- 
formed. 

Article  XL 

I.  This  agreement  and  Declaration  of  Trust  may  be  al- 
tered or  amended,  except  as  regards  the  liability  of  the  Trus- 
tees, at  any  annual  or  special  meeting  of  the  shareholders, 
with  the  consent  of  at  least-two-thirds  of  the  shares  then 
outstanding,  provided  notice  of  the  proposed  amendment  or 
alteration  shall  have  been  given  in  the  call  for  the  meeting; 
and  in  event  of  such  amendment  or  alteration,  the  same  shall 
be  attached  to  and  made  a  part  of  the  Agreement  and  a  copy 
thereof  shall  be  filed  with  the  Recorder  of  Deeds  of  Peoria, 
Illinois. 

In  Witness  Whereof,  the  said  John  W.  Kinross,  Geo.  A. 
Caldwell,  John  A.  Hoblit,  Samuel  W.  Gasaway,  Trustees 
hereunder,  have  hereunto  set  their  hands  and  seals  in  token 
of  their  acceptance  of  the  trust  herein  declared,  for  them- 
selves and  their  successors: 

John  W  Kinross  Seal. 

Geo  A   Caldwell  Seal. 

John   A    Hoblit  Seal. 

Samuel  W  Gasaway         Seal. 
And  the  said  John  W.  Kinross,  Geo.  A.  Caldwell,  John  A. 
Hoblit,  Samuel  W.  Gasaway,  Wm.  J.  Peck,  William  Seefeldt, 
and  Wm.  G.  Peters,  have  hereunto  set  their  hands  and  seals  in 


Appendix.  583 

token  of  their  assent  to  and  approval  of  the  terms  of  trust, 
for  themselves  and  their  assigns,  the  day  and  year  first  above 
mentioned  and  written. 

John  W  Kinross  Seal. 

Geo.  A.  Caldwell  Seal. 

John   A    Hoblit  Seal. 

Samuel  W.  Gasaway         Seal. 

Wm  J   Peck  Seal. 

Wm.  Seefeldt  Seal. 

Wm.  G.  Peters  Seal. 

AAIERICAN  MANUFACTURING  COMPANY 

Declaration  of  Trust. 
****** 

Trustees. 

John  W.  Kinross  For  three  years 

John   A.    Hoblit  For  three  years 

G€0.  A.  Caldwell  For  two  years 

Samuel  W.  Gasaway  For  one  year 

****** 

Officers. 

John  W.  Kinross,  President 

George  A.  Caldwell,  Vice-President 

Samuel  W.  Gasaway,  Secretary 

John  W.  Kinross,  Treasurer 

****** 

State  of  Illinois    | 
County  of  j  ^^• 

Before  me,  the  undersigned  authority,  personally  came  and 
appeared  John  W.  Kinross,  Geo.  A.  Caldwell,  John  A.  Hoblit, 
Samuel  W.  Gasaway,  William  Seefeldt,  Wm.  G.  Peters,  and 
Wm.  J.  Peck,  who  signed  the  foregoing  instrument  before 
me  and  acknowledged  that  they  had  signed  the  same  as  their 


584  Trusts  for  Business  Purposes. 

voluntar}^  act  and  deed  and  for  the  purpose  therein  set  forth. 
In  Witness  Whereof,  I  have  hereunto  set  my  hand  and 
seal  of  office  this  30th  day  of  October,  A.  D.  1918. 

John  H  Cramer 

Notary  Public. 
John  H.  Cramer 
Notarial  Seal 
Peoria  County,  111. 


Appendix.  585 

GENERAL  FORM  OF  TRUST  AGREEMENT. 

This  Agreement  and  Declaration  of  Trust  (hereinafter 
designated  "Declaration  of  Trust"),  made  and  entered  into  in 
the  City  of  Chicago,  State  of  Illinois,  between , 


' ) 


(here  insert  names  of  Trustees),  together  with  their  successors 

(hereinafter     designated     "Trustees"),     and      , 

,     ,     ,     (here     insert 

names  of  subscribers). 

WITNESSETH,  That: 

Whereas,  the  said  Subscribers  propose  to  convey,  assign, 
transfer  and  deliver,  or  cause  to  be  conveyed,  assigned,  trans- 
ferred and  delivered  to  the  Trustees  certain  lands  and  other 
property,  the  particulars  whereof  are  specified  in  Schedules  I. 
II,  III,  IV,  V  and  VI,  hereof  respectively;  and 

Whereas,  it  is  the  purpose  and  intention  that  the  Trust  here- 
by created  and  designated  as (here  insert  name 

of  the  Trust)  shall  manage,  conduct  and  operate  the  said  lands 
and  property,  and  to  conduct  and  carry  on  any  business  or  en- 
terprise in  connection  therewith,  or  incidental  thereto  which  the 
Trustees  may  deem  desirable  for  the  best  interest  of  the  said 
lands  and  property ;  and 

Whereas,  the  Trustees,  for  the  purpose  of  defining  the  bene- 
ficial interests  of  the  Subscribers,  and  their  respective  assigns 
in  the  said  lands  and  property,  have  agreed  to  issue  to  such 
Subscribers,  or  to  their  respective  nominees  negotiable  certifi- 
cates for  25,000  shares  of  beneficial  interest  in  the  said  Trust, 
in  the  following  proportions,  to  wit : 


586  Trusts  for  Busini;ss  Purposes. 

Number  of  Shares 
of  Beneficial 
Names  of  Beneficiaries  Interest 

10,000 

5,000 

5,000 

• 2,500 

2,500 

Now,  Therefore,  the  Trustees  hereby  declare  that  they  will 
hold  the  said  lands  and  property  to  be  acquired  by  them  as 
aforesaid,  as  well  as  all  other  property  which  they  may  acquire 
as  such  Trustees,  together  with  the  proceeds  and  avails  thereof 
(all  of  such  property  being  hereinafter  sometimes  referred  to 
as  the  "Trust  Estate"),  in  Trust,  to  hold,  manage  and  dispose 
of  the  same,  and  to  collect,  receive  and  distribute  the  net  income 
thereof,  for  the  benefit  of  the  cestuis  que  trustent,  from  time 
to  time,  whose  beneficial  interests  are  represented  by  certificates 
for  shares  of  beneficial  interest  issued  hereunder,  and  in  the 
manner  and  subject  to  the  stipulations  herein  contained,  to  wit: 

Article  I. 

Section  i.  In  so  far  as  may  be  practicable  and  convenient, 
the  Trustees  shall  manage  the  Trust  Estate,  execute  all  instru- 
ments of  writing  and  do  and  perform  all  other  things  relating 

to  this  Trust  under  the  name  of And  every  duly 

authorized  instrument  executed  in  such  name  shall  have  the 
same  efifect  as  if  executed  in  the  name  of  the  Trustees. 

Section    2 ,     ,     , 

,   ,  all  of  the  said  City  of  Chicago, 

shall  be,  and  shall  constitute  the  original  Trustees  hereunder. 

In  case  of  the  death,  resignation  or  inability  at  any  time  to 


Appendix.  587 

act  of  any  of  said  Trustees  or  of  any  successor  to  any  of  them 
appointed  under  the  provisions  hereof,  the  vacancy  thus  cre- 
ated shall  be  filled  by  the  remaining  Trustees.  As  soon  as  the 
Trustee  or  Trustees  so  selected  shall  have  accepted  the  terms 
of  this  Trust  by  an  instrument  of  writing,  the  Trust  Estate 
shall,  without  any  further  act  or  conveyance,  forthwith  vest  in 
the  new  Trustee  or  Trustees  jointly  with  the  Trustee  or  Trus- 
tees remaining  in  office,  with  all  the  rights,  title,  interest,  priv- 
ileges, powers,  duties  and  estate  which  the  former  Trustees  pos- 
sessed during  their  incumbency  to  the  same  extent  as  if  such 
newly  selected  Trustee  or  Trustees  had  been  original  Trustees 
under  this  Trust. 

Section  3.  Any  Trustee  may  resign  his  trust  by  a  written 
instrument  acknowledged  in  the  manner  prescribed  for  the  ac- 
knowledgment of  deeds  and  by  sending  by  registered  mail,  the 
said  instrument  thus  acknowledged,  to  the  remaining  trustees. 

Article  II. 

Section  i.  The  Trustees  are  authorized  and  empowered: 
(a)  To  manage,  improve,  protect,  develop  and  maintain 
any  of  the  lands  and  real  estate  belonging  to  this  Trust  or 
which  may  hereafter  be  held  by  the  Trustees  under  this  Trust, 
improved  or  unimproved  and  wheresoever  situate,  including 
town  sites,  town  lots,  farm,  timber  and  grazing  lands,  fruit 
orchards,  fruit  and  stock  farms  and  all  rights,  easements  and 
interests  in  such  lands  and  real  estate ;  in  connection  therewith 
to  carry  on  and  conduct  agricultural  operations  of  all  kinds  and 
to  breed  and  raise  cattle  and  live  stock,  and  to  sell  or  otherwise 
dispose  of  the  products  of  such  operations,  including  lumber, 
lumber  products  and  logs ;  to  sell,  convey,  transfer  and  convert 
the  said  properties  for  such  price  or  consideration  and  upon 


588  Trusts  for  Business  Purposes. 

such  terms,  trusts  and  conditions  as  the  Trustees  may  deter- 
mine, and  to  grant  leases  of  the  whole  or  any  part  or  parts  of 
such  lands  or  real  estate  for  any  term  of  years,  beyond  the 
possible  termination  of  this  Trust  or  for  any  less  term,  in  pos- 
session or  reversion  or  at  will  and  with  or  without  option  to 
purchase,  and  to  make  allowances  to,  and  make  arrangements 
with,  tenants  and  others,  and  to  accept  surrenders  of  leases  and 
tenancies;  to  subdivide,  resubdivide,  partition,  repartition  or 
vacate  subdivisions  of,  the  said  Trust  properties,  to  exchange 
the  same  or  any  part  or  parts  thereof  for  other  properties,  real 
or  personal,  to  dedicate  public  ways  and  places,  to  grant  ease- 
ments of  any  kind ;  and  to  deal  with  the  lands  and  real  estate  at 
any  time  belonging  to  this  Trust,  and  every  part  thereof  in  all 
other  ways  and  for  such  consideration  as  it  would  be  lawful  for 
any  person  owning  the  same  to  deal  with  the  same,  whether 
similar  to  or  different  from  the  ways  above  specified  at  any 
time  or  times  hereafter. 

(b)  To  conduct  mining  operations  of  all  kinds  as  to  prop- 
erty at  any  time  belonging  to  this  Trust  and  which  may  be  suit- 
able for  those  purposes,  and  in  connection  therewith  to  smelt, 
mill,  reduce,  prepare  for  the  market,  refine  and  otherwise  treat 
minerals,  ores  and  metals  of  all  kinds,  including  fuel  products, 
and  to  sell  or  otherwise  dispose  of  for  the  benefit  of  this  Trust 
the  products  and  by-products  resulting  from  such  operations. 

(c)  To  search  and  drill  for,  refine,  pipe,  store,  transport, 
sell,  manufacture  and  distribute  gas,  petroleum  and  other  oils 
and  any  and  all  of  their  products  and  by-products  as  to  property 
at  any  time  belonging  to  this  Trust,  and  which  may  be  suitable 
for  those  purposes,  and  in  connection  therewith  to  construct, 
build,  operate  and  maintain  oil  wells,  gas  wells,  refineries,  build- 
ings, works,  workshops,  laboratories,  machinery,  power  plants, 
sawmills,  stores  and  warehouses ;  and  to  the  extent  the  Trustees 


Appendix.  5^9 

may  deem  proper  in  respect  to  mining  oil  and  gas  operations,  to 
acquire  and  deal  in  leases. 

(d)  To  exercise  any  and  all  rights  incident  to  the  ownership 
or  possession  of  securities  and  obligations  of  all  kinds,  of  any 
corporation,  trust,  association,  partnership  or  individual  that 
at  any  time  shall  be  subject  to  the  trusts  of  these  presents;  and 
to  transfer  into  the  name  of  any  person  any  shares  of  stock, 
or  shares  of  interest  or  securities  in,  or  of,  any  corporation, 
trust  or  association  that  at  any  time  shall  be  subject  to  the 
trusts  of  these  presents  and  to  allow  any  such  shares  or  securi- 
ties to  stand  in  the  name  of  such  person  so  long  as  the  Trustees 
shall  think  proper  for  the  purpose  of  qualifying  such  person  as 
a  director  or  officer  of  such  corporation,  trust  or  association,  or 
otherwise,  for  the  purpose  of  maintaining  the  organization  of 
such  corporation,  trust  or  association. 

(e)  To  collect  and  sue  for,  and  to  receive  and  to  receipt  for, 
all  sums  due  to  the  Trustees ;  to  represent  the  cestuis  que  trust- 
ent  in  all  suits  or  legal  proceedings  in  any  court  of  law  or 
equity,  or  before  any  body  or  tribunal ;  to  commence  such  suits 
or  proceedings,  or  to  defend  the  same,  and  to  employ  counsel ; 
to  compound,  compromise,  abandon  or  adjust  by  arbitration  or 
otherwise,  any  actions,  suits,  proceedings,  disputes,  claims,  de- 
mands and  things  relating  to  this  Trust,  and  to  give  time,  with 
or  without  security,  for  the  payment,  or  delivery,  of  any  debts 
or  property  claimed  in  favor  of  this  Trust  and  to  pay  or  satisfy 
any  debts  or  claims,  upon  any  evidence  that  the  Trustees  may 
deem  sufficient. 

(f)  To  buy,  acquire,  own,  hold  or  lease  such  real  and  per- 
sonal property  as  the  Trustees  may  think  proper,  suitable  or 
convenient  for  any  of  their  undertalcings  hereunder  and  to 
pledge,  lease,  incumber  and  to  exchange,  sell  and  otherwise  dis- 
pose of  such  property  whenever  they  deem  it  expedient  for 


590  Trusts  for  Business  Purposes. 

them  so  to  do  on  such  terms  as  they  may  deem  best  and  to  take 
in  exchange  therefor,  cash  or  stocks,  securities,  obligations  or 
property  of  any  kind. 

(g)  To  invest,  from  time  to  time,  any  moneys  under  the 
control  of  the  Trustees  by  them  deemed  to  be  available  for  the 
purpose,  in  any  securities  or  property  which  the  Trustees  may 
select  or  approve,  in  the  same  manner  and  to  the  same  extent 
as  if  they  were  not  Trustees  but  were  making  such  investments 
as  natural  persons,  and  without  any  limitation  in  respect  of 
the  character  of  the  securities  or  property  invested  in,  and  to 
sell  or  otherwise  dispose  of  any  such  investment,  and  reinvest 
the  proceeds  thereof,  or  any  part  thereof,  with  continuing  pow- 
ers to  invest  and  reinvest  during  the  existence  of  this  Trust. 

(h)  To  pay  any  and  all  taxes,  assessments,  charges  or  liens 
of  any  kind  imposed  upon  or  against  the  Trust  Estate  or  any 
part  thereof  out  of  any  funds  available  for  such  purpose. 

(i)  To  pay  the  expenses,  legal  or  otherwise,  of  the  organi- 
zation of  this  Trust  and  the  acquisition  by  them  of  the  land 
and  property  acquired  hereunder ;  to  carry,  at  the  expense  of 
this  Trust,  wliatever  insurance  they  may  deem  adequate  for 
their  protection,  and  for  the  benefit  of  this  Trust  and  the  Trust 
Estate,  and  to  pay  all  the  necessary  and  proper  expenses  of 
the  carrying  on  of  the  business,  and  the  management  of  this 
Trust,  and  the  property  constituting  the  Trust  Estate. 

(m)  To  borrow,  raise  or  secure  the  payment  of  money  for 
the  purpose  of  this  Tnist  by  mortgage,  pledge,  cliarge,  or  other 
incumbrance  of  the  whole  or  any  part  of  the  Trust  Estate,  and 
to  give  proper  securities  or  evidences  for  the  moneys  so  raised, 
which  may  mature  at  a  time  or  times  beyond  the  possible 
termination  of  this  Trust  or  at  any  earlier  time  or  times ; 
to  enter  into  any  and  all  contracts,  guaranties,  obligations 
and   other    instruments,   which   in   the   opinion   of   the   Trus- 


Appendix,  59^ 

tees  may  be  necessary  or  expedient  to  promote,  protect  and 
conserve  the  Trust  Estate,  including  the  making  of  guaranties 
to  secure  the  performance  of  contracts  and  obligations  of  other 
parties ;  and  to  charge  the  Trust  Estate  with  any  and  all  obliga- 
tions of  indebtedness  incurred  by  the  Trustees  in  the  exercise 
by  them  of  any  or  all  of  the  foregoing  powers  conferred  upon 
them,  provided,  however,  the  Trustees  shall  have  no  power  or 
authoritv  whatsoever  to  borrow  money  on  the  credit  or  on 
behalf  of  the  cestuis  que  trustent  personally,  or  to  make  any 
contract  binding  the  cestuis  que  trustent  personally  for  repay- 
ment of  any  money  raised  by  mortgage,  pledge,  cliarge  or  other 
incumbrance  in  pursuance  of  the  provisions  hereof,  or  to  make 
any  contract  or  incur  any  liability  whatsoever  on  behalf  of  the 
cestuis  que  trustent  binding  them  personally. 

(n)  To  pay  themselves  as  Trustees  hereunder,  such  com- 
pensation for  their  services  as  they  may  deem  reasonable,  and 
to  employ  and  discharge  such  experts,  counsel,  representatives, 
agents,  and  employees  of  any  kind  as  the  Trustees  may  deem 
proper,  define  their  tenure,  fix  their  compensation  and  define 
their  duties. 

(o)  Generally,  to  do  all  and  singular,  such  things  as  may 
be  necessary  or  advantageous  in  the  execution  of  the  foregoing 
powers,  or  any  of  them,  and  not  inconsistent  therewith,  anvl 
to  manage,  control  and  conduct  this  Trust  as  fully  as  if  the 
Trustees  were  the  absolute  owners  of  the  Trust  Estate. 

The  naming  of  any  specific  authority  and  pov/ers  herein  shall 
not  be  construed  as  limiting  the  general  powers  conferred  upon 
the  Trustees. 

Section  2.  The  Trustees  shall  have  the  entire  title  (legal 
and  equitable)  to,  and  the  absolute  and  exclusive  management 
and  control  of,  all  property  at  any  time  belonging  to  this  Trust, 


592  Trusts  for  Business  Purposes. 

and  they  shall  have  the  absolute  management  and  disposition 
thereof. 

Section  3.  Stated  meetings  of  the  Trustees  shall  be  held  at 
least  once  a  month  from  time  to  time  upon  the  call  of  any  two 
of  the  Trustees.  Two  Trustees  present  in  person  shall  consti- 
tute a  quorum,  and  the  affirmative  vote  of  two  Trustees  sliall  be 
necessary  to  the  validity  of  any  action  taken  by  the  Trustees. 

Section  4.  Any  Trustee,  by  written  power  of  attorney,  may 
delegate  his  powers  as  such,  for  a  period  not  exceeding  twelve 
months  at  any  one  time,  to  any  other  Trustee  or  Trustees,  pro- 
vided that  in  no  case  shall  less  than  two  Trustees,  each  acting 
in  person,  exercise  the  powers  hereunder. 

Section  5.  The  death  or  resignation  of  any  of  the  Trustees, 
shall  not  operate  to  annul  or  terminate  this  Trust  or  to  revoke 
any  existing  agency  created  pursuant  to  the  terms  of  this  in- 
strument. 

Article  III. 

Section  i.  Each  Trustee  shall  be  indemnified  by,  and  re- 
ceive reimbursement  from  the  Trust  Estate  for  his  expenses 
and  disbursements,  including  counsel  fees,  and  also  in  respect 
of  all  losses  and  liabilities  by  him  incurred  or  suffered  in  ad- 
ministering the  Trust  Estate  or  any  part  thereof,  except  such 
as  may  arise  from  his  personal  or  willful  default.  And  for  the 
payment  of  such  expenses,  disbursements,  losses  and  liabilities 
the  Trustees  shall  have  a  lien  on  the  Trust  Estate  prior  to  any 
rights  or  interest  of  the  cestuis  que  trustent  thereto  or  therein. 

Section  2.  The  receipt  of  the  Trustees  or  any  of  them,  or 
any  of  the  agents,  representatives  or  employees  thereunto  au- 
thorized, for  moneys  or  property  paid  or  delivered  to  them,  or 
any  of  them,  shall  be  an  effectual  discharge  therefrom  to  the 
persons  paying  or  delivering  the  same,  and  no  person  taking 


Appe;ndix.  593 

such  receipt  shall  be  bound  to  see  to  the  application  of  such 
moneys  or  property.  And  no  purcliaser  or  person  dealing  with 
the  Trustees  shall  be  bound  to  see  that  the  terms  of  this  trust 
are  complied  with  or  to  ascertain  or  inquire  as  to  the  existence 
or  occurrence  of  any  event  or  purpose  in  or  for  which  a  sale, 
mortgage,  pledge  or  charge  is  herein  authorized  or  directed  or 
otherwise  as  to  the  purpose  or  regularity  of  any  of  the  acts  of 
the  Trustees,  or  any  of  them  purporting  to  be  done  in  pursu- 
ance of  any  of  the  provisions  or  powers  herein  contained,  or  as 
to  the  regularity  of  the  discharge,  resignation  or  appointment 
of  any  Trustee.  And  no  purchaser  or  person  dealing  with  any 
Trustee  purporting  to  act  under  any  delegation  of  authority 
from  any  other  Trustee  shall  be  concerned  to  ascertain  or  in- 
quire whether  an  occasion  exists  in  which  he  is  authorized  so  to 
act  or  in  which  such  delegation  is  permitted  or  whether  such 
delegated  authority  is  still  subsisting. 

Section  3.  Every  note,  bond,  contract,  instrument,  certifi- 
cate, share  or  undertaking  and  every  other  act  or  thing  whatso- 
ever executed  or  done  by  the  Trustees,  or  any  of  them  in  con- 
nection with  this  Trust,  shall  be  conclusively  taken  to  have  been 
executed  or  done  only  in  their  or  his  capacity  of  Trustees  or 
Trustee  under  this  Declaration  of  Trust,  and  such  Trustees  or 
Trustee  shall  not  be  personally  liable  thereon.  Every  note, 
bond,  contract,  instrument,  certificate,  share  or  undertaking 
made  or  issued  by  the  Trustees  shall  recite  that  the  same  is 
executed  or  made  by  them,  not  individually,  but  as  Trustees 
under  this  Declaration  of  Trust  and  may  contain  any  further 
recital  which  they  or  he  may  deem  appropriate.  And  every 
written  obligation,  contract  or  undertaking  made  or  issued  by 
the  Trustees,  shall  provide  expressly,  in  substance  or  effect,  as 
follows : 

"This  obligation   (contract  or  undertaking,  as  the  case 


594  Trusts  for  Business  Purposes. 

may  be)  is  made  (or  issued)  by  the  undersigned,  not  in- 
dividually, but  as  Trustees  under  a  certain  Agreement  and 
Declaration  of  Trust,  and  hereby  made  a  part  hereof,  and 
is  enforcible  only  against,  and  is  payable  only  out  of,  the 
trust  property  held  thereunder,  any  and  all  personal  lia- 
bility of  the  Trustees  and  cestuis  que  trustent  thereimder 
being  and  having  been  expressly  waived  by  the  holder 
hereof." 
Section  4.     The  Trustees  shall  not  be  liable  for  errors  of 

judgment  in  exercising  any  of  their  powers  or  discretions  un- 
der this  Declaration  of  Trust,  nor  for  any  loss  arising  out  of 
any  investment,  nor  for  failure  to  sue  for  or  to  collect  any 
moneys  or  property  belonging  to  this  Trust,  nor  for  any  act  or 
any  omission  to  act,  performed  or  omitted  by  them,  in  the  exe- 
cution of  their  powers  or  discretion,  in  good  faith,  and  each 
shall  be  answerable  and  accountable  only  for  his  own  several 
acts,  receipts,  neglects  and  defaults  severally  and  respectively, 
and  not  for  those  of  any  other,  or  of  any  agent  employed  by 
them,  or  of  any  bank,  trust  company,  broker  or  auctioneer  or 
other  person,  with  whom,  or  into  whose  hands,  any  trust 
moneys,  property  or  securities  may  be  deposited  or  come. 

ARTICI.E  IV. 

Any  Trustee  may  acquire,  own,  hold  and  dispose  of  shares 
of  interest  in  this  Trust  to  the  same  extent  as  if  he  were  not  a 
Trustee,  without  being  disqualified  to  act  as  Trustee,  and  while 
owning  and  holding  such  shares  on  his  personal  account,  as  a 
cestui  que  trust,  shall  be  entitled  to  the  same  rights,  privileges 
and  interests  as  any  cestui  que  trust,  and  shall  be  chargeable 
witli  no  liability  because  he  is  both  a  Trustee  and  a  cestui  que 
trust  hereunder.  Any  trustee,  notwithstanding  the  fiduciary 
position  which  he  holds,  may  deal  with  the  Trustees  in  relation 
to  the  Trust  Estate  as  freely  as  if  he  were  not  a  Trustee  here- 
under. 


Appendix.  595 

Article  V. 

Section  i.  No  recourse  shall  at  any  time  be  had,  under,  or 
upon  any  note,  bond,  contract,  instrument,  certificate,  under- 
taking, obligation,  covenant,  or  agreement  issued  or  executed  by 
the  Trustees  under  or  pursuant  to  the  terms  of  this  Declaration 
of  Trust  or  in  managing  the  Trust  Estate  or  by  any  agent,  rep- 
resentative or  employee  of  the  Trustees,  or  by  reason  of  any- 
thing done,  or  omitted  to  be  done  by  them  or  any  of  them, 
against  the  Trustees  individually  or  against  any  agent,  repre- 
sentative or  employee,  or  any  cestui  que  trust,  or  the  holder  of 
any  other  security  issued  by  the  Trustees,  either  directly  or  in- 
directly, by  legal  or  equitable  proceeding,  or  by  virtue  of  any 
suit  or  otherwise,  except  only  to  compel  the  proper  application 
or  distribution  of  the  Trust  Estate,  it  being  expressly  under- 
stood and  agreed  that  (a)  this  Declaration  of  Trust  and  all  ob- 
ligations and  instruments  executed  thereunder,  are  executed 
pursuant  thereto  by  the  Trustees;  that  (b)  any  acts  done  or 
omitted  to  be  done  by  them  are  solely  the  obligations,  instru- 
ments, acts  and  omissions  of,  or  in  respect  of,  the  Trust  Es- 
tate, and  that  (c)  all  the  obligations,  instruments,  liabilities, 
covenants  and  agreements,  acts  and  omissions  of  the  Trustee 
or  Trustees  shall  be  enforced  against  and  be  satisfied  out  of 
the  Trust  Estate  only,  or  such  part  thereof  as  shall  under  the 
terms  and  provisions  of  this  Declaration  of  Trust  be  liable  for 
or  chargeable  therewith.  And  all  personal  and  individual  lia- 
bility of  the  Trustees,  or  any  of  them,  except  as  above  stated, 
and  of  all  their  agents,  representatives  and  employees,  and  of 
the  cestuis  que  trustent  are  hereby  expressly  waived  and  nega- 
tived. The  Trustees  and  their  agents  are  not  authorized  to  con- 
tract any  debt,  or  do  anything  which  will  charge  the  cestuis  que 
trustent,  or  bind  any  or  all  of  them  personally. 


596  Trusts  for  Business  Purposes. 

Section  2.  No  corporation,  trust,  association  or  body 
politic  shall  be  affected  by  notice  that  any  of  its  shares  of  stock 
or  bonds  or  other  securities  are  subject  to  this  Trust,  or  be 
bound  to  see  to  the  execution  of  this  Trust  or  to  ascertain  or 
inquire  whether  any  transfer  of  any  such  shares,  bonds  or  se- 
curities by  the  Trustees  is  authorized  by  this  Trust,  notwith- 
standing such  authority  may  be  disputed  by  some  other  person. 

Article  VI. 

Section  i.  During  the  continuance  of  this  Trust  the  bene- 
ficial interests  therein  and  thereunder  shall  be  evidenced  solely 
by  certificates  for  shares  of  beneficial  interest,  for  which  pro- 
vision is  hereinafter  made. 

Section  2.  The  beneficial  interest  in  this  Trust  shall  be  di- 
vided into  60,000  beneficial  interest  shares,  25,000  of  which 
shall  be  issued  forthwith  to  the  following  persons  named,  or  to 
their  respective  nominee  or  nominees,  in  the  following  propor- 
tions, to  wit: 

Num.be r  of  Sliares 
of  Beneficial 
Name  of  Beneficiaries.  Interest. 

10,000 

5.000 

5,000 

2,500 

2,500 

The  remainder  of  said  beneficial  interest  shares  may  be  is- 
sued from  time  to  time  by  the  Trustees  in  such  amounts  as  they 
mav  from  time  to  time  determine  in  exchange  for  additional 
property  conveyed  or  transferred  to  them  under  the  trusts  here- 
of or  for  moneys  advanced  to  or  for  them  for  the  purposes 
hereof. 


Appendix.  597 

Section  3.  As  evidence  of  the  ownership  of  interest  shares, 
the  Trustees  sliall  cause  to  be.  issued  to  each  cestui  que  trust  a 
certificate  or  certificates,  which  shall  be  in  substantially  the 
following  form,  to  wit: 

CERTIFICATE  OF  BENEFICIAL  INTEREST  IN 

TRUST. 

No Beneficial  Interest  Shares. 

(Not  Subject  to  Assessment.) 

This  certifies  that is 

the  holder  of beneficial  interest  shares 

in  a  certain  Trust  Estate  known  and  designated  as  The , 

created  under  the  terms  of  an  Agreement  and  Declaration  of 

Trust,  dated 1922  (a  duplicate  original 

of  which  is  on  file  with  the  Commercial  Trust  and  Savings 
Bank,  of  Chicago,  Illinois),  which  is  hereby  referred  to  and 
made  a  part  of  this  certificate. 

All  of  the  provisions  of  said  Agreement  and  Declaration  of 
Trust  are  hereby  made  a  part  hereof  in  all  respects  with  the 
same  force  and  efifect  and  to  all  intents  and  purposes  as  if  the 
same  were  herein  set  forth  at  length,  and  said  interest  shares 
are  issued,  received  and  held  subject  to  all  such  provisions  to 
which  the  holder  by  the  acceptance  hereof  consents  and  agrees. 
And  except  only  as  in  said  Agreement  and  Declaration  of  Trust 
provided,  this  certificate  confers  no  rights,  privileges  or  interests. 

The  owner  hereof  appearing  as  such  upon  the  books  of  the 
Trustees  is  entitled  to  participate  in  all  net  income  and  each 
distribution  of  money  or  other  property  of  the  Trust  Estate 
made  to  the  owners  of  certificates  for  beneficial  interest  shares 
under  the  terms  of  said  Agreement  and  Declaration  of  Trust,  in 
the  proportion  which  the  total  number  of  such  shares  evidenced 
by  this  certificate  bears  to  the  total  number  of  such  shares  out- 


598  Trusts  for  Business  Purposes. 

standing  at  the  date  of  such  distribution.  In  the  event  of 
liquidation  of  the  Trust  Estate,  such  distribution  shall  be  made 
in  the  same  manner. 

This  certificate  is  made  by  the  undersigned,  not  individually, 
but  as  Trustees  under  said  Agreement  and  Declaration  of 
Trust,  and  any  and  all  personal  liability  of  the  Trustees  and  the 
cestuis  que  trustent  under  said  Agreement  and  Declaration  of 
Trust  is,  by  the  acceptance  and  as  a  consideration  for  the  issue 
and  execution  hereof,  expressly  waived  and  negatived. 

The  interests  represented  by  this  certificate  are  transferable 
by  the  holder  in  person  or  by  attorney  upon  the  books  of  said 
Trustees  and  not  otherwise,  and  only  upon  the  surrender  of 
this  certificate  properly  endorsed. 

In  Witness  Whereof,  the  Trustees  have  hereunto  signed 
their  names  this day  of 191 .. . 


As  Trustees  under  an  Agreement  and  Dec- 
laration of  Trust,  dated 1922, 

creating  The Trust,  and  not  in- 
dividually. 

On  the  back  of  each  such  certificate  shall  be  endorsed  a  form 
of  transfer  of  the  beneficial  interest  shares  represented  thereby, 
substantially  as  follows,  to  wit: 

For  value  received,  I  hereby  sell,  assign,  transfer  and  de- 
liver to the  beneficial 

interest  shares  represented  by  the  within  certificate  of  interest 
of  Trust,  and  I  hereby  request  that  said  transfer  be  recorded 
on  the  books  of  said  Trustees. 


Appe^ndix,  599 


Witness  my  hand  this day  of. 

191. .. 


In  presence  of 


Section  4.  The  Trustees  may,  from  time  to  time  distribute 
to  the  cestuis  que  trustent,  such  income,  proceeds  or  other  parts 
of  the  Trust  Estate  as  they  may  determine. 

All  distributions  of  income,  proceeds  or  other  parts  of  the 
Trust  Estate,  and  the  amount  and  conditions  of  payment  there- 
of, among  the  cestuis  que  trustent  (except  in  case  of  the  termi- 
nation of  this  Trust)  shall  rest  in  the  absolute  discretion  of  the 
Trustees,  whose  decision  with  respect  thereto  shall  be  final,  but 
in  each  such  distribution  the  owner  (appearing  as  such  on  the 
books  of  the  Trustees)  of  beneficial  interest  share  or  shares 
hereunder  shall  be  entitled  to  participate  in  the  proportion  which 
the  total  number  of  such  shares  owned  by  him  bears  to  the  total 
number  of  shares  then  outstanding  hereunder.  The  Trustees 
may  retain,  undistributed,  such  sums  as  they  may  deem  wise  to 
create  a  sinking  reserve,  surplus  or  contingent  fund. 

Section  5.  In  case  of  the  loss  or  destruction  of  any  certifi- 
cate of  beneficial  interest  the  Trustees  may,  under  such  condi- 
tions as  they  may  deem  proper,  issue  a  new  certificate  in  place 
of  the  one  so  lost  or  destroyed. 

Section  6.  Shares  of  beneficial  interest  hereunder  shall  be 
personal  property  giving  only  the  rights  in  this  instrument,  and 
in  the  certificates  therefor,  specifically  set  forth. 

The  ownership  of  certificates  for  beneficial  interest  shares 
hereunder  shall  not  entitle  the  cestuis  que  trustent  to  any  title 
in  or  to  the  trust  property  whatsoever,  or  right  to  call  for,  de- 
mand or  secure  any  partition  or  division  of  the  same,  or  for  an 
accounting  during  the  continuance  of  this  Trust  and  no  widow 


6oo  Trusts  for  Business  Purposes. 

or  widower,  heir  at  law,  or  devisee,  of  any  shareholder  shall 
have  any  right  of  dower  or  right  of  homestead  or  right  of  in- 
heritance or  any  other  real  property  right  (as  distinguished 
from  personal  property  right)  in  any  of  the  real  estate  which 
is  at  any  time  a  part  of  the  Trust  Estate. 

The  registered  holders  of  certificates  for  the  time  being,  anc' 
no  one  else,  shall  be  the  cestuis  que  trustent  of  the  Trust  Estate 
It  is  expressly  declared  that  a  Trust  and  not  a  partnership  is 
created  by  this  instrument,  and  that  the  holders  of  certificates 
of  interest  are  cestuis  que  trustent  and  hold  no  other  relation 
to  the  Trustees  than  that  of  cestuis  que  trustent,  with  only  such 
rights  as  are  conferred  upon  them  as  such  cestuis  que  trustent. 

Section  7.  The  death,  insolvency,  or  incapacity  of  any  cestui 
que  trust  during  the  continuance  of  this  Trust,  shall  not  oper- 
ate to  determine  this  Trust,  nor  shall  it  entitle  the  legal  repre- 
sentatives, heirs  or  assigns,  voluntary  or  involuntary,  of  such 
deceased,  insolvent  or  incapacitated  cestui  que  trust,  to  an  ac- 
counting or  to  take  any  action,  at  law  or  in  equity,  or  otherwise, 
in  the  courts  or  elsewhere,  against  the  Trustees ;  but  such  legal 
representatives,  heirs  or  assigns  shall  succeed  only  to  the  rights 
of  such  deceased,  insolvent  or  incapacitated  cestui  que  trust, 
subject  to  this  Declaration  of  Trust,  and  any  amendments  there- 
to, and  shall  succeed  to  nothing  more. 

Section  8.  The  Trustees  shall  liave  no  power  to  call  upon 
the  cestuis  que  trustent  for  the  payment  of  any  sum  of  money 
or  assessment  whatever  other  than  such  sums  as  they  may  at 
any  time  personally  agree  to  pay  by  way  of  subscription  to 
shares  of  beneficial  interests,  or  otherwise. 

Section  9.  All  transfers  of  shares  of  beneficial  interest 
(otherwise  than  by  operation  of  law)  shall  be  in  writing  under 
the  hand  of  the  transferror,  and  upon  surrender  thereof,  with 
the  existing  certificate  for  such  shares,  to  the  Trustees,  shall  be 


Appendix.  6oi 

recorded  in  the  books  of  the  Trustees,  and  a  new  certificate 
therefor  shall  be  issued  to  the  transferee,  which  new  certificate 
and  the  rights,  interests  and  privileges  of  the  holder  thereof  in 
respect  to  such  new  certificate,  shall  thereupon  become  subject 
to  this  Declaration  of  Trust.  In  case  of  a  transfer  of  only  a 
part  of  the  shares  mentioned  in  any  certificate,  a  new  certificate 
for  the  residue  thereof  shall  be  issued  to  the  transferror.  Until 
the  existing  certificate  shall  be  so  surrendered  and  transfer  re- 
corded, the  transferror  shall  be  deemed  to  be  the  holder  of  the 
share  or  shares  represented  thereby  for  all  the  purposes  of  this 
Trust. 

Article  VII. 

This  Trust  shall  continue  from  the  date  hereof  and  until  the 
expiration  of  a  term  of  twenty-one  (21)  years  after  the  death 
of  the  last  survivor  of  the  persons  whose  names  are  signed 
hereto,  at  which  time  it  shall  cease. 

The  Trustees  then  in  office  shall  wind  up  its  affairs,  liquidate 
its  assets  and  distribute  the  same,  or  sell  the  assets  and  dis- 
tribute the  proceeds  thereof,  among  the  cestuis  que  trustent  ac- 
cording to  their  respective  interests;  provided,  however,  that  if 
prior  to  the  expiration  of  the  said  period,  two  of  the  Trustees 
shall  vote  to  terminate  this  Trust  at  an  earlier  date,  then  in  such 
event,  this  Trust  sliall  terminate  on  the  date  so  fixed.  For  the 
purpose  of  winding  up  their  afifairs  and  liquidating  this  Tnist, 
the  then  Trustees  shall  continue  in  office  until  such  duties  have 
been  fully  performed. 

Article  VIII. 

A  duplicate  original  of  this  Declaration  of  Trust  shall  be 
deposited  with  the  said  Commercial  Trust  and  Savings  Bank. 
In  the  event  of  the  dissolution  of  the  said  bank,  or  the  expira- 


6o2  Trusts  for  Business  Purposes. 

tion  of  its  charter,  the  Trustees  shall  have  the  power  to  desig- 
nate the  successor  depository.  The  depository  shall  deliver 
to  such  successor,  all  documents  in  its  possession  relating  to 
the  Trust  Estate.  This  Declaration  of  Trust  shall  be  recorded 
in  such  public  recording  offices  as  by  the  Trustees  may  be 
deemed  necessary  or  desirable  from  time  to  time. 

Article  IX. 

This  Declaration  of  Trust  may  at  any  time  or  times  be 
amended  or  altered  by  the  Trustees,  in  any  particular  wliatso- 
ever,  but  not  so  as  to  extend  the  duration  of  the  trust  or  to 
affect  the  validity  or  effect  of  anything  previously  done  by  the 
Trustees,  and  except  in  regard  to  exemption  from  personal  lia- 
bility of  the  Trustees,  their  agents,  representatives  and  em- 
ployees or  the  cestuis  que  trustent,  and  in  regard  to  the  acquired 
rights  of  third  persons.  In  the  event  any  alteration  or  amend- 
ment is  made  by  the  Trustees,  the  same  shall  be  attached  to  and 
made  a  part  of  this  Declaration  of  Trust,  and  a  copy  thereof 
with  the  certificate  of  the  Trustees,  or  a  majority  of  them,  as  to 
its  adoption  shall  be  filed  with  the  said  Commercial  Trust  and 
Savings  Bank.  And  such  certificate  shall  be  evidence  of  the 
adoption  of  such  amendment  or  alteration  for  all  purposes,  and 
shall  be  conclusive  in  favor  of  purchasers  and  other  persons 
subsequently  dealing  with  the  Trustees. 

Article  X. 

In  the  construction  of  these  presents,  words  in  the  singular 
number  include  the  plural  number  and  vice  versa  and  words 
denoting  males  include  females,  and  words  denoting  persons, 
include  firms,  associations,  trusts  and  corporations,  and  the 
word  Trustees  shall  extend  to  and  include  the  Trustees  for  the 


Appendix.  603 

ti'me  being  of  these  presents,  unless  a  contrary  intention  is  to 
be  inferred  from  the  subject  matter  or  context. 

This   instrument  is  executed   in  five  counterparts   each   of 
which  shall  be  deemed  an  original. 

In  Witness  Whereof  the  said , , 

,  and ,  have  hereun- 
to set  their  respective  hands  and  seals  in  token  of  their  respec- 
tive acceptance  of  the  Trust  hereinbefore  mentioned,  for  them- 
selves and  for  their  successors  ;  and  the  said , 

,  and   ,  Subscribers, 

have  hereunto  likewise  set  their  respective  hands  and  seals  in 
token  of  their  respective  assents  to,  and  approvals  of,  the  terms 
of  the  said  Trust,  for  themselves,  and  for  their  assigns,  the 
day  and  year  first  above  written. 

(seal) 

(seal) 

(seal) 

(seal) 

(seal) 

Trustees. 

(seal) 

(seal) 

(seal) 

(seal) 

Subscribers. 

State  of  Illinois,    ^ 
County  of  Cook,      j 

I^ ,  a  Notary  Public  in  and   for 

the  County  and  State  aforesaid  do  hereby  certify  that , 

,  ,  and  ,  Trustees,  per- 
sonally known  to  me  to  be  the  same  persons  whose  names  are 
subscribed  to  the  foregoing  instrument  as  such  Trustees,  ap- 
peared before  me  this  day  in  person  and  severally  acknowledged 


6o4  Trusts  for  Business  Purposes. 

that  they  signed,  sealed,  and  delivered  the  said  instrument  as 
their  free  and  voluntary  act  and  deed,  as  Trustees  as  aforesaid, 
for  the  uses  and  purposes  therein  set  forth. 

In  Witness  Whereof  I  have  hereunto  set  my  hand  and 
Notarial  seal  this day  of A.  D.  191 .. . 

My  commission  expires 


Notary  Public. 

State  of  Illinois,  I  g 
County  of  Cook,      S 

I,    ,  a  Notary  Public  in  and 

for  the  County  and  State  aforesaid  do  hereby  certify  that 
, , and , 

Subscribers,  personally  known  to  me  to  be  the  same  persons 
whose  names  are  subscribed  to  the  foregoing  instrument  as 
such  Subscribers,  appeared  before  me  this  day  in  person  and 
severally  acknowledged  that  they  signed,  sealed,  and  delivered 
the  said  instrument  as  their  free  and  voluntary  act  and  deed, 
for  the  uses  and  purposes  therein  set  forth. 

In  Witness  Whereof,  I  have  hereunto  set  my  hand  and 
Notarial  Seal  this day  of A.  D.  19 . . . 

My   commission  expires 

Notary  Public. 

SCHEDULE  I. 

•  ■  Lands  in  Cass  County^  Indiana. 

All  of  Section  one  containing  640  acres.  All  of  Section 
two  containing  640  acres;  the  north  half  of  northwest  quarter 
ow  Section  three,  containing  160  acres;  the  West  half  of 
southeast  quarter  and  the  northeast  quarter  of  Section  four, 
containing  240  acres ;  the  northeast  quarter,  the  north  half 
of  southeast  quarter  and  the  southeast  quarter  of  southeast 
quarter  of  Section  ten,  containing  290  acres ;  all  of  Section 
eleven,  containing  640  acres ;  all  of  Section  twelve,  contain- 
ing 640  acres;  all  of  Section  thirteen,  containing  622  acres; 


Appendix.  605 

all  of  Section  fourteen,  containing  640  acres;  the  east  half, 
the  southeast  quarter  of  the  northwest  quarter  and  the  south- 
west quarter  of  Section  fifteen,  containing  520  acres;  the 
south  half  of  southeast  quarter  and  the  southwest  quarter  of 
southwest  quarter  of  Section  sixteen,  containing  120  acres; 
the  west  half  of  northwest  quarter,  the  west  half  of  south- 
west quarter  and  the  northeast  quarter  of  southwest  quarter 
of  section  seventeen,  containing  200  acres;  the  east  half  of 
northeast  quarter  and  the  east  half  of  southeast  quarter  of 
Section  nineteen,  containing  160  acres ;  the  southwest  quarter 
of  northwest  quarter  and  the  southwest  quarter  of  Section 
twenty,  containing  200  acres. 

SCHEDULE  II. 

Lands  in  Lake  County,  Indiana. 

The  northeast  quarter,  the  Northwest  quarter,  the  soutli- 
west  quarter  and  west  half  of  southeast  quarter  of  Section 
thirteen,  containing  559.65  acres,  more  or  less;  all  of  Section 
fourteen  containing  638.88  acres,  more  or  less ;  all  of  Section 
fifteen,  containing  640.15  acres,  more  or  less;  the  west  half  of 
southeast  quarter  and  Lots  three  and  two  of  Section  sixteen, 
containing  233.02  acres,  more  or  less;  all  of  Fractional  Sec- 
tion twenty,  containing  394.81  acres,  more  or  less;  all  of  Sec- 
tion twenty-one,  containing  639.91  acres,  more  or  less;  all 
of  Section  twenty-two,  containing  640.32  acres,  more  or  less ; 
all  of  Section  twenty-three,  containing  640.32  acres,  more  or 
less;  the  west  half  of  northeast  quarter,  and  the  west  half 
and  the  southeast  quarter  of  Section  twenty-four,  containing 
561.40  acres,  more  or  less;  all  of  Section  twenty-five,  con- 
taining 637.84  acres,  more  or  less ;  all  of  Section  twenty-six, 


6o6  Trusts  for  Business  Purposes. 

containing  641.43  acres,  more  or  less;  all  of  Section  twenty- 
seven,  containing  644.71  acres,  more  or  less. 

SCHEDULE  III. 
Lands  in  BerriEn  County,  Michigan. 

East  half  of  southwest  quarter,  east  half  of  west  half  of 
southwest  quarter  of  Section  thirty-four.  Township  thirty- 
seven  South,  Range  eighteen  East,  northwest  quarter,  north- 
west quarter  of  northeast  quarter,  north  half  of  northeast 
quarter  of  southwest  quarter  of  Section  two,  and  northeast 
quarter  of  Section  three.  Township  thirty-eight  South,  Range 
eighteen  East. 

Southeast  quarter  of  the  southeast  quarter  of  Section  Three, 
Township  thirty-eight  South,  Range  eighteen  East. 

Also  west  half  of  the  southwest  quarter  of  Section  two 
and  west  half  of  the  southeast  quarter  of  Section  three,  all 
in  Township  thirty-eight  South,  Range  eighteen  East.  Also 
Lots  one,  two,  three  and  four  of  subdivision  of  that  part  of 
Lot  two  lying  south  of  North  Creek,  being  fractional  south- 
east quarter  of  the  southeast  quarter  of  Section  thirty-three. 
Township  thirty-seven  South,  Range  eighteen  East. 

Also  west  three-quarters  of  the  north  half  of  Government 
Lot  number  two  of  Section  thirty-three,  Township  thirty- 
seven  South,  Range  eighteen  East,  less  three  acres  off  the 
north  end  of  the  west  half  of  the  north  half  of  said  Govern- 
ment Lot  nunmber  two,  North  Creek  being  the  south  boundary 
of  the  above  described  premises,  together  with  all  riparian 
rights  and  water  privileges. 


Appendix,  607 

SCHEDULE  IV. 
Lands  in  Benton  County,  Michigan. 

The  northeast  quarter  of  northeast  quarter,  south  half  of 
northwest  quarter  of  northeast  quarter,  southwest  quarter  of 
northeast  quarter,  southwest  quarter  of  southeast  quarter  of 
northeast  quarter,  and  all  of  government  Lot  one,  except  a 
strip  463.6  feet  wide  off  the  north  end  of  said  Lot  one,  all 
in  Section  seven.  Township  thirty-seven  South,  Range  eighteen 
East,  together  with  all  riparian  rights  and  water  privileges 
thereunto  belonging  or  in  anywise  appertaining,  containing 
121.93  acres,  more  or  less; 

A  strip  of  land  210.4  feet  wide,  off  the  south  side  of  the 
north  half  of  the  northwest  quarter  of  the  northeast  quarter 
of  Section  seven.  Township  thirty-seven  South,  Range  eighteen 
East,  said  strip  of  land  being  1,326  feet  in  length,  containing 
6.4  acres,  more  or  less ; 

Lot  number  three,  of  Block  number  two,  of  the  registered 
plat  of  Slay  ton's  subdivision,  in  Sections  seven  and  eight, 
Township  thirty-seven  South,  Range  eighteen  East,  as  the 
same  is  registered  in  the  office  of  the  clerk  of  the  Circuit 
Court  in  and  for  Benton  County  at  Benton  Harbor,  lying, 
being  and  situate  in  Section  seven,  Township  thirty-seven 
South,  Range  eighteen  East,  containing  4.62  acres,  more  or 
less; 

Lot  A  of  Block  2  of  Slayton's  subdivision  (being  the  north- 
west quarter  of  the  southeast  quarter  of  the  northeast  quarter) 
of  section  seven.  Township  thirty-seven  South,  Range  eighteen 
East,  containing  10  acres  more  or  less. 

Lot  number  eight  on  the  plat  of  Harbor  View,  as  said  plat 
appears  of  record  in  plat  book  No.  i,  on  page  177  of  the 
public  records  of  Benton  County,  Michigan.     Said  land  being 


6o8  Trusts  for  Business  Purposes. 

situated    in    Section   eighteen,   Township   thirty-seven    South, 
Range  eighteen  East,  containing  ij^  acres,  more  or  less. 

SCHEDULE  V. 
Lands  in  St.  Joseph  County,  Michigan. 

An  undivided  two-ninths  (2/9)  interest  in  the  following 
described  lands  in  St.  Joseph  County,  Michigan : 

All  of  Sections  one,  two,  three,  four,  five,  six,  seven  and 
eight,  the  west  half  of  the  northwest  quarter,  and  the  west 
half  of  the  southwest  quarter  of  Section  nine;  the  east  half, 
and  the  east  half  of  the  northwest  quarter  of  Section  ten; 
all  of  Section  eleven;  the  west  half  of  Section  twelve;  the 
north  half  of  Section  fourteen ;  the  east  half  of  the  northeast 
quarter  of  Section  fifteen;  all  of  Sections  seventeen,  eighteen, 
nineteen  and  twenty;  the  west  half  of  the  northeast  quarter, 
the  northwest  quarter  and  the  north  half  of  the  southwest 
quarter  of  Section  twenty-one;  the  south  half  of  the  north- 
east quarter,  and  the  southeast  quarter  of  Section  twenty-two; 
the  southwest  quarter  of  the  northeast  quarter,  the  south  half 
of  the  northwest  quarter,  the  west  half  of  the  southeast  quar- 
ter, the  southeast  quarter  of  the  southeast  quarter,  and  the 
southwest  quarter  of  Section  twenty -three ;  the  south  half  of 
the  northeast  quarter,  the  southeast  quarter  of  the  northwest 
quarter,  and  the  southeast  quarter  of  Section  twenty- four; 
the  northeast  quarter,  the  southwest  quarter  of  the  northwest 
quarter,  the  east  half  of  the  southeast  quarter,  and  the  west 
half  of  the  southwest  quarter,  of  Section  twenty-five;  all  of 
Section  twenty-six;  the  east  half,  the  east  half  of  the  north- 
west quarter,  the  southwest  quarter  of  the  northwest  quarter, 
and  the  southwest  quarter  of  Section  twenty-seven ;  the  south- 
east quarter  of  the  northeast  quarter,  and  the  south  half  of 


Appendix.  609 

Section  twenty-eight ;  the  southeast  quarter  of  Section  twenty- 
nine;  the  north  half  of  the  northeast  quarter,  the  southwest 
quarter  of  the  northeast  quarter,  south  o  degrees  ii  minutes 
east  1,058.6  feet  to  a  brass  cap  monument;  thence  north  o 
degrees  22  minutes  east  1,058.7  feet  to  the  point  of  beginning, 
containing  0.124  acres)  ;  together  with  all  and  singular  the 
tenements,  hereditaments  and  appurtenances  hereunto  belong- 
ing or  in  anywise  appertaining,  including  all  our  estate,  right, 
title,  and  interest  therein  and  thereto  both  at  law  and  in 
equity. 

SCHEDULE  VI. 

Certain  property  and  assets  of  The  Wabash  Company,  Inc., 
a  corporation  of  the  State  of  Indiana,  including  book  ac- 
counts and  notes  receivable  of  other  corporations  and  individ- 
uals, said  notes  aggregating  in  amount  the  sum  of  Two  Hun- 
dred Sixty-two  Thousand  and  Fifty  Dollars  ($262,050)  ;  a 
certain  oil,  gas  and  mineral  lease,  dated  August  ist,  1919,  from 
Joseph  K.  Ryan  on  40  acres  of  land,  being  the  northeast 
quarter  of  the  southwest  quarter  of  Section  nineteen,  Town- 
ship twenty-one  North,  Range  fourteen  West,  Carroll  County, 
Indiana;  a  certain  oil,  gas  and  mineral  lease,  dated  August 
1st,  1919,  from  Harry  Uhl  on  100  acres  of  land,  being  the 
west  100  acres  of  unleased  land  in  Section  sixteen.  Township 
twenty-one  North,' Range  fourteen  West,  Grant  County,  Indi- 
ana; a  certain  oil,  gas  and  mineral  lease,  dated  May  10,  1920, 
from  Roy  Harmon  and  others  on  80  acres  of  land,  being  the 
east  half  of  the  southwest  quarter  of  Section  two,  Township 
twenty-one  North,  Range  fifteen  West,  Grant  County,  Indi- 
ana; a  certain  oil,  gas  and  mineral  lease,  dated  July  2,  1920, 
from  Walter  Bourque  on  240  acres  of  land,  being  the  north- 
west  quarter   of   Section   twelve,   and   the   east   half   of   the 


6io  Trusts  for  Business  Purposes. 

northeast  quarter  of  Section  eleven,  Township  sixteen  North, 
Range  ten  West,  Howard  County,  Indiana,  mineral  rights  in, 
and  royalty  interest  on  oil  produced  from,  the  following  de- 
scribed property: 

(That  certain  farm  situated  in  Howard  County,  Indiana, 
known  as  the  Landis  place,  and  more  particularly  described 
as  follows : 

All  of  Section  twelve,  the  north  half  of  Section  thirteen, 
Township  thirteen.  Range  eleven,  lying  east  of  old  bed  of 
the  Wabash  River ;  the  west  half  of  northwest  quarter,  south- 
west quarter,  west  half  of  southeast  quarter  and  southeast 
quarter  of  southeast  quarter  of  Section  seven,  the  north  half 
of  Section  eighteen;  the  northwest  quarter,  west  half  of  Sec- 
tion eighteen ;  the  northwest  quarter,  west  half  of  northeast 
quarter,  northeast  quarter,  northwest  quarter  of  southeast 
quarter  and  Lots  one,  two  and  four  of  Section  seventeen; 
Lot  two  of  Section  sixteen ;  Lots  six  and  seven.  Section  nine, 
and  Lots  six  and  seven.  Section  eight.  Township  thirteen. 
Range  ten,  less,  however,  the  right  of  way  of  the  Logansport 
and  Wabash  Valley  Road.)  subject  to  all  of  the  liabilities  of 
said  The  Wabash  Company,  Inc.,  as  of  the  ist  day  of  Sep- 
tember, 1918;  and  a  certain  oil,  gas  and  mineral  lease,  dated 
May  I,  1920,  from  Thomas  J.  McGrath  and  others  on  40 
acres  of  land,  being  the  west  half  of  the  west  half  of  the 
northeast  quarter  of  Section  twenty-six.  Township  twenty-one 
North,  Range  fifteen  West,  Logansport,  Indiana,  subject  to 
the  liabilities  of  said  The  Wabash  Company,  Inc.,  with  respect 
to  said  lease  as  of  the  lOth  day  of  September,  1920. 


Appendix.  6ii 

DOMESTIC  PRODUCTS  COMPANY. 

General  Offices: 
Chicago,  Illinois. 

This  Agreement,  made  this  22nd  day  of  June,  A.  D.  1922, 
between  James  A.  Coopman,  William  T.  GrablE  and  Ethel 
S.  GrablE,  designated  as  the  subscribers,  and  JamEs  A.  Coop- 
man,  William  T.  Grable  and  Ethel  S.  Grable,  together 
with  their  successors,  herein  designated  as  the  trustees,  WIT- 
NESSETH, that, 

Whereas,  the  subscribers  are  now  engaged  in  a  general  sales 
business,  and  they  propose  to  exchange,  deed,  transfer,  assign 
and  deliver  to  the  trustees  herein,  under  the  designation  of  the 
Domestic  Products  Company,  all  contracts,  orders,  the  good 
will  of  the  established  business,  and  all  other  kind  of  assets  now 
belonging  to  the  subscribers  in  their  present  established  sales 
organization. 

And  it  is  likewise  proposed  that  for  and  in  consideration  of 
the  property  aforesaid  that  the  beneficial  interests  in  the  present 
property,  and  all  future  property  acquired  by  the  trustees,  and 
in  the  business  conducted  by  them,  shall  be  evidenced  and  repre- 
sented herein  by  thirty  (30)  common  beneficial  interests  or 
shares,  of  the  par  value  of  One  Hundred  ($100.00)  Dollars 
each,  said  beneficial  interest  or  shares  being  fully  paid  and  non- 
assessable. 

Now,  Therefore,  the  subscribers,  by  these  presents,  do 
hereby  exchange,  deed,  transfer,  assign  and  deliver  to  the 
trustees  hereunder,  all  of  the  present  business,  orders,  and  good 
will  now  conducted  by  the  subscribers  under  the  business  name 
of  Domestic  Products  Company,  to  the  trustees  herein. 

And  the  subscribers  hereby  direct  and  instruct  the  trustees 


6i2  Trusts  for  Business  Purposi;s. 

herein  to  issue  ten  (lo)  common  beneficial  interests  or  shares 
to  each  of  the  trustees  herein. 

And  now  the  trustees  hereby  declare  that  they  will  hold  said 
property  so  transferred  and  such  as  may  be  transferred  to  them, 
as  well  as  all  other  property  which  may  be  acquired,  together 
with  the  proceeds  thereof  in  trust,  to  manage  and  dispose  of 
the  same  for  the  benefit  of  the  beneficiaries  hereunder,  and 
their  successors  and  assigns. 

And  the  trustees  further  declare  that  they  will  accept  the 
trust  and  will  execute  it  in  the  manner  hereinabove  directed, 
and  subject  to  the  stipulations  herein  contained,  to  wit: 

First  :  That  whenever  the  term  "Trustees"  is  used  herein, 
it  shall  refer  to  and  include  the  above  Trustees,  and  also  any 
successors  in  trust,  appointed  under  the  terms  hereof.  That 
whenever  the  term  "Company"  is  used  herein,  it  shall  be  deemed 
to  refer  to  said  Dome;stic  Products  Company,  being  the  des- 
ignation, so  far  as  practicable,  of  the  said  Board  of  Trustees 
and  their  successors  in  trust,  in  their  collective  capacity,  under 
the  terms  hereof.  That  whenever  the  term  "Beneficiary"  is 
used  herein,  it  shall  be  deemed  to  mean  the  owner  of  beneficial 
interests  in  and  to  the  trust  estate  herein,  and  that  whenever  the 
term  "Certificate  Holder"  is  used  herein,  it  shall  be  deemed  to 
mean  the  owner  of  a  certificate  evidencing  one  or  more  benefi- 
cial interests,  of  the  par  value  of  One  Hundred  ($100.00) 
Dollars  each,  in  and  to  the  Trust  Estate  herein  mentioned,  the 
legal  title,  ownership  and  control  of  which  estate  is  vested  in 
said  trustees ;  and  that  whenever  the  term  "Certificate"  is  used 
herein,  it  shall  be  deemed  to  mean  an  instrument  in  writing,  or 
printed  or  partly  written  and  printed,  issued  by  said  Trustees, 
evidencing  the  ownership  of  an  equitable  interest  in  said  estate 
of  one  or  more  beneficial  interests,  as  may  therein  be  stated. 
(B)     The  trustees,  in  their  collective  capacity,  shall  be  des- 


Appendix.  613 

ignated,  as  far  as  practicable,  as  the  Domestic  Products  Com- 
pany, and  under  that  name  shall,  so  far  as  practicable,  conduct 
all  business  and  execute  all  instruments  in  writing,  in  perform- 
ance of  their  trust. 

Second  :  The  Trustees  do  hereby  acknowledge  the  receipt 
by  them  of  the  property  aforementioned,  and  it  is  expressly 
agreed  that  the  said  property,  as  well  as  any  other  which  may 
hereafter  be  acquired  by  the  Trustees  for  the  purpose  herein 
mentioned  under  the  terms  hereof,  shall  be  received  by  the 
Trustees,  and  shall  be  by  them  held,  owned,  controlled,  man- 
agd,  and  applied  to  the  uses  and  purposes  herein  mentioned. 

(B)  In  addition  to  the  present  established  business,  the 
trustees  shall  have  the  right  to  act  as  agents  for  manufacturers, 
either  on  salary  or  a  commission  basis,  in  the  sales  of  products 
of  different  manufacturers,  and  they  shall  have  the  right  to  do 
any  and  all  things  necessary  to  accomplish  the  purpose  herein 
set  forth,  the  same  as  natural  persons  might  or  could  do,  and 
in  any  part  of  the  world,  as  principals,  agent,  contractors,  trus- 
tees or  otherwise,  and  either  alone  or  in  company  with  others. 

(C)  That  money  or  property,  together  with  the  income  and 
issues  thereof  received  or  acquired  by  the  said  trustees  under 
the  terms  hereof,  shall  constitute  and  be  held,  kept  and  used  by 
them  as  a  Trust  Estate,  for  the  use  and  benefit  of  the  benefi- 
ciaries in  the  said  estate,  and  that  the  said  trustees  are  author- 
ized, empowered  and  directed  to  apply  the  said  money  or  prop- 
erty or  the  proceeds,  the  increase  or  income  thereof,  constituting 
said  Trust  Estate,  as  their  discretion  dictates,  to  the  best  inter- 
est of  the  beneficiaries  hereunder. 

Third  :  The  trustees  hereunder  shall  be  three  in  number, 
and  the  said  trustees  herein  mentioned  shall  hold  their  office 
until  the  annual  meeting,  or  until  their  successors  have  been 
elected  and  have  accepted  their  trust. 


6i4  Trusts  for  Business  Purpose;s. 

(B)  The  trustees  shall,  at  every  annual  meeting  or  adjourn- 
ment thereof,  elect  a  full  Board  of  Trustees  to  serve  for  the 
next  ensuing  year,  said  annual  meeting  to  be  on  the  first  Tues- 
day in  July,  following  the  first  Monday  in  July,  each  year,  com- 
mencing in  1922. 

Fourth  :  The  trustees  are  authorized  to  employ  all  neces- 
sary or  proper  agents,  servants,  brokers,  attorneys,  employees 
or  counsel,  to  carry  into  effect  the  purpose  of  the  trust  herein 
contained,  and  to  protect  and  preserve  the  same,  and  to  provide 
and  pay  out  of  said  Trust  Estate,  the  compensation,  fees,  com- 
missions, or  expenses  incurred  in  the  management  thereof,  and 
to  vote  salaries  to  themselves.  To  contract  for  and  on  behalf 
of  said  trust  estate,  and  to  bind  the  same  and  its  property  to 
the  performance  of  such  contracts;  to  borrow  money  on  be- 
half of  such  trust  estate  on  such  terms  and  conditions  as  said 
trustees  shall  deem  best,  and  to  bind  said  estate  and  its  assets 
to  the  payment  of  such  indebtedness  and  to  pledge  and  incum- 
ber any  property  of  said  estate,  whether  real,  personal  or  mixed, 
for  the  security  of  the  indebtedness  so  incurred,  under  such 
terms  and  conditions  as  to  the  trustees  may  seem  best,  and  to 
agree  upon,  approve  and  fix,  execute  and  deliver  in  the  name 
and  on  behalf  of  the  said  trust  estate,  any  deed,  pledge,  mort- 
gage, bond,  note  endorsement  or  guarantee,  trust  deed,  or  any 
other  instrument  which  may  be  necessary  or  proper  to  carry  out 
the  terms  of  this  instrument.  But  neither  the  said  trustees  nor 
the  said  certificate  holders  or  beneficiaries  nor  any  of  them  shall 
be  in  any  manner  personally  liable  by  virtue  of  any  contract, 
note,  bond,  deed  of  trust,  mortgage  or  other  instrument  exe- 
cuted under  the  terms  of  this  paragraph,  but  the  same  shall 
fully  bind  the  property  of  the  said  trust  estate  for  the  perform- 
ance thereof. 

(B)     It  is  expressly  understood  that  all  expenses  incurred 


Appi:ndix,  615 

by  said  trustee  in  carr}dng  out  the  terms  hereof,  as  well  as  all 
liabilities  incurred  by  them  in  the  execution  of  said  trust, 
whether  arising  from  contract  or  tort,  shall  be  considered  as 
expenses  of  executing  said  trust,  which  shall  first  be  paid  out 
of  the  assets  and  properties  thereof,  and  which  shall  be  a  first 
and  prior  lien  against  the  said  estate  and  property,  superior  to 
all  others. 

(C)  The  said  trustees  shall,  in  their  own  name,  as  trustees 
of  said  estate,  bring  any  suit  or  action  which  in  their  judgment 
shall  be  necessary  or  proper  to  protect  said  estate  or  to  enforce 
any  contract  made  for  the  benefit  thereof,  and  to  defend  in 
their  discretion  any  suit  or  action  against  said  estate  or  against 
the  trustees  thereof.  The  said  trustees  are  expressly  authorized 
to  bring  or  defend  such  suit  in  their  discretion  or  to  compro- 
mise and  settle  any  suit,  claim  or  controversy  in  which  the 
said  estate  is  interested,  as  to  them  may  seem  best,  and  to  dis- 
charge the  same  out  of  said  estate  and  its  assets ;  and  they  are 
specially  authorized  to  pay  or  transfer  out  of  .said  estate  and 
its  assets,  all  sums  of  money  or  property  necessary  to  discharge 
any  judgment  against  them  in  their  said  capacity  as  trustees, 
together  with  all  court  costs,  or  other  costs,  including  counsel 
and  attorney's  fees  and  also  to  pay  out  of  said  estate  or  its  as- 
sets, such  sums  of  money,  or  transfer  or  appropriate  property 
thereof,  for  the  purpose  of  settling,  compromising,  or  adjust- 
ing any  such  claim  or  controver.sy,  together  with  any  such  costs 
and  expenses  connected  therewith,  and  all  of  such  expenditures 
shall  be  treated  as  expenses  of  executing  this  trust. 

(D)  The  trustees  shall  have  full  power  to  invest  and  re- 
invest the  trust  estate,  its  profits,  income,  increase,  surplus  or 
avails,  subject  to  the  terms  of  this  instrument.  But  the  trustees 
shall  not  delegate  to  any  agent  or  attorney  in  fact,  the  power  to 
contract  on  behalf  of  said  estate,  or  bind  it  to  the  payment  of 


6i6  Trusts  for  Business  Purposes. 

money,  but  when  said  trustees  have  agreed  upon  the  terms  and 
forms  of  any  contract  or  contracts,  or  other  instrument  or  in- 
struments necessary  or  proper  for  the  carrying  out  of  the  pur- 
poses herein  mentioned,  and  the  execution  of  the  trust  hereby 
created,  they  may,  by  resolution  or  other  written  authority, 
designating  and  describing  the  form  of  such  contract  or  con- 
tracts or  instrument,  authorize  an  agent  or  agents,  attorney  or 
attorneys  in  fact,  to  countersign  and  deliver,  in  the  name  and  on 
behalf  of  said  trustees,  any  such  contract  or  instrument,  but  in 
no  case  shall  such  agents  or  attorneys  be  authorized  to  counter- 
sign or  deliver  any  notes,  bonds,  bill  of  sale,  mortgages,  trust 
deeds,  encumbrances,  or  pledges  transferring,  binding,  encum- 
bering or  alienating  the  property  of  said  trust  estate,  whether 
real,  personal  or  mixed. 

(E)  The  trustees  shall  hold  the  legal  title  to  all  property 
at  any  time  belonging  to  their  trust  and  shall  have  and  exercise 
the  exclusive  management  and  control  of  the  same,  and  the 
right  of  the  said  trustees  to  manage,  control  and  administer  the 
said  trust  estate  shall  be  absolute  and  unconditional,  free  from 
the  control  or  management  of  the  beneficiaries. 

(F)  So  far  as  strangers  to  this  trust  are  concerned,  a  reso- 
lution of  the  trustees  authorizing  a  particular  act  to  be  done 
shall  be  conclusive  evidence  in  favor  of  such  strangers  that  such 
act  is  within  the  powers  of  said  trustees,  and  no  purchaser  from 
the  trustees  or  one  loaning  money  to  the  trustees  shall  be  bound 
to  see  to  the  application  of  the  purchase  money  or  loaned  money 
or  other  consideration  paid  or  delivered  by  or  for  said  purchaser 
or  loaner  to  or  for  said  trustees. 

Fifth  :  Stated  meetings  of  the  trustees  shall  be  held  at 
least  once  every  three  months,  and  other  meetings  shall  be  held 
from  time  to  time,  upon  the  call  of  any  officer  or  trustee.  A 
majority  of  the  Board  of  Trustees  shall  constitute  a  quorum, 


Appe;ndix.  617 

and  the  concurrence  of  all  the  trustees  shall  not  be  necessary 
to  the  validity  of  any  action  done  by  them,  but  the  wish  of  the 
majority  of  the  trustees  present  and  voting  at  any  meeting  shall 
be  conclusive.  It  shall  be  necessary  for  a  majority  of  the  trus- 
tees to  concur  in  all  v^^ritings  and  transactions  of  every  kind  or 
character,  as  the  only  means  of  executing  this  trust  and  vali- 
dating its  acts.  A  majority  of  the  trustees  may  amend  this  trust, 
but  vested  rights  sliall  not  be  impaired ;  they  may  adopt  an'i 
use  a  common  seal ;  they  may  make,  adopt,  amend  or  repeal  such 
by-laws,  rules,  and  regulations,  not  inconsistent  with  the  terms 
of  this  instrument,  as  they  may  deem  necessary  for  the  conduct 
of  their  business  or  for  the  government  of  themselves,  their 
agents  or  representatives. 

Sixth  :  The  trustees  may  elect  officers,  who  shall  have  the 
authority  and  perform  such  duties  as  the  trustees  may  deter- 
mine. They  may  combine  the  duties  of  several  officers  in  one 
person.  Two  of  such  officers,  elected,  at  least,  shall  be  from 
among  their  own  members.  The  trustees  shall  have  authority 
to  elect  or  appoint  temporary  officers  to  serve  during  the  ab- 
sence or  disability  of  regular  officers ;  to  fix  the  compensation 
of  any  or  all  officers,  agents  or  employees  they  may  appoint,  and 
are  likewise  authorized  to  pay  themselves  such  compensation 
for  their  services  as  they  may  deem  reasonable. 

(B)  The  trustees  shall  cause  to  be  kept  by  a  Secretary 
elected  by  them,  a  record  of  all  meetings  of  the  beneficiaries  and 
of  the  trustees,  which  record  shall  be  similar  in  character  and 
of  the  effect  as  that  kept  in  case  of  corporations,  and  so  far  as 
strangers  to  this  trust  are  concerned,  shall  be  conclusive  against 
the  trustees  of  the  facts  and  doings  therein  stated. 

(C)  Any  trustee  may  acquire,  own  and  dispose  of  benefi- 
cial interests  in  this  trust,  to  the  same  extent  as  if  he  were  not 


6i8  Trusts  for  Business  Purposes. 

a  trustee  hereof,  and  any  trustee  may  be  removed  for  just  and 
proper  cause. 

(D)  In  case  of  death,  resignation  or  removal  of  any  trus- 
tee, the  remaining  members  of  the  Board  of  Trustees  shall  have 
the  power  and  authority  to  elect  trustees  to  fill  the  unexpired 
term  or  vacancy  thus  created,  and  for  that  purpose,  a  majority 
of  the  remaining  trustees  shall  be  sufficient  to  elect  one  or  more 
trustees  as  above  stated,  and  such  trustees,  as  above  elected, 
shall  occupy  the  same  relation  to  this  trust  as  if  they  were  orig- 
inal parties  to  this  instrument.  In  case  of  death,  resignation 
or  disqualification  of  the  entire  Board  of  Trustees,  a  new 
Board  may  be  appointed  for  the  unexpired  term  by  a  Court  of 
Equity  of  competent  jurisdiction. 

(E)  Neither  the  said  certificate  holders,  nor  the  owners  of 
beneficial  interests,  or  any  of  them,  or  their  property  shall  be 
liable  for  any  indebtedness  or  liability  created  by,  growing  out 
of,  or  arising  from  the  execution  of  the  said  trust  estate, 
whether  arising  from  contract  or  tort  of  the  said  trustees,  their 
servants,  agents  or  employees,  in  the  administration  of  said  es- 
state.  The  trustees,  personally,  nor  either  of  them,  nor  their 
private  property,  whether  real,  personal  or  mixed,  shall  be  in 
any  manner,  liable  for  any  debt  or  liability  incurred  by  said 
trustees,  or  any  of  them,  in  the  administration  or  management 
of  the  said  estate,  whether  arising  from  contract  or  tort  of  the 
said  trustees  or  any  of  them,  or  their  agents,  servants,  or  em- 
ployees ;  and  neither  said  trustees  or  either  of  them  shall  ever 
be  held  personally  liable  for  any  damage  or  injury  to  person  or 
property  caused  by  or  arising  from,  incident  to,  or  growing  out 
of  the  execution  of  said  trust ;  nor  shall  they  be  liable  for  the 
acts  or  omissions  of  each  other.  That  the  assets  of  the  said 
trust  estate  only,  shall  be  liable  for  any  indebtedness,  liability, 
wrong,  injury  or  tort  incurred,  arising  out  of  or  growing  out 


Appb^ndix.  619 

of,  the  administration  of  the  said  trust  estate  by  the  said  trustees 
or  any  of  them  or  for  any  act  or  neghgence  or  default  of  their 
servants,  agents,  or  employees  in  the  administration  of  said 
estate. 

(F)  The  said  trustees  shall  use  ordinary  and  reasonable 
diligence  in  the  performance  of  this  trust,  but  shall  not  be  liable 
to  the  beneficiaries  or  any  of  them,  for  any  act,  default,  failure 
or  negligence  in  or  connected  with  the  execution  of  the  said 
trust,  provided,  the  same  shall  not  amount  to  and  constitute 
fraud,  embezzlement  or  wilful  breach  of  trust,  and  they  shall 
not  be  obliged  to  give  bond  to  secure  the  due  performance  of 
this  trust  by  them. 

Seventh  :  For  the  sole  purpose  of  designating  the  interests 
of  the  present  and  future  beneficiaries  hereunder,  and  their 
legal  representatives  and  assigns,  the  beneficial  interests  herein 
shall  be  divided  into  thirty  (30)  common  beneficial  interests  or 
shares,  of  the  par  value  of  One  Hundred  ($100.00)  Dollars 
each,  and  the  said  trustees  may  execute  and  deliver  to  each  such 
beneficiary  hereunder,  a  certificate  signed  by  the  officers  desig- 
nated for  that  purpose,  which  shall  evidence  and  set  forth  how 
many  interests  or  shares  of  the  par  value  of  One  Hundred 
($100.00)  Dollars  each,  the  said  beneficiary  is  entitled  to  here- 
under ;  and  the  certificates  issued  by  the  trustees  to  said  bene- 
ficiaries shall  be  substantially  in  the  following  form,  to  wit : 

Certificate. 

Number Shares 

Domestic  Products  Company. 

Capitalization  30  Shares. 

General  Offices : 

Chicago,  Illinois. 

This  certifies  that is  the  holder  of 

sliares  in  the  capital  of  Domestic  Products  Company,  fully 
paid  and  non-assessable,   subject  to   Declaration  of   Trust  in 


620  Trusts  for  Business  Purposes. 

favor  of  said  organization,  dated  June  22nd,  1922,  and  recorded 
in  Cook  County,  Illinois,  and  transferable  only  on  the  books  of 
this  organization,  in  person  or  by  attorney,  upon  surrender  of 
this  certificate  properly  endorsed. 

In  Witness  Whereof,  the  said  organization  has  caused  this 
certificate  to  be  signed  by  its  duly  authorized  officers,  and  its 

seal  to  be  hereunto  affixed  this day  of 

A.  D.  19... 

President. 

Secretary. 
Shares  $100.00  each. 

(B)  By  a  unanimous  vote  of  all  the  trustees  at  any  annual 
meeting,  or  special  meeting  called  for  that  purpose,  the  trustees 
shall  have  the  power  to  issue  preferred  beneficial  interests  of 
said  trust  state,  to  such  an  amount  from  time  to  time  as  they 
shall  deem  expedient  for  the  interest  and  advancement  of  the 
trust  estate  herein  created,  and  such  preferred  beneficial  inter- 
ests may  be  sold  for  cash,  exchanged  for  property,  or  distribu- 
ted as  dividends,  at  the  option  of  the  trustees. 

(C)  In  case  of  the  loss  or  destruction  of  any  certificate  of 
beneficial  interests  issued  hereunder,  the  trustees  may,  under 
such  terms  as  they  may  deem  expedient,  issue  new  certificates  in 
place  of  the  ones  lost  or  destroyed. 

(D)  The  trustees  may  from  time  to  time  declare  and  pay 
such  dividends  as  are  earned  by  all  outstanding  beneficial  inter- 
ests, out  of  the  net  earnings  from  time  to  time  received  by  them, 
as  they  may  deem  advisable;  but  the  amount  of  such  dividends 
and  the  payment  of  them,  shall  be  wholly  in  the  discretion  of 
the  trustees,  and  the  surplus  profits  or  earnings  shall  not  be 
maintained  as  separate  fund,  but  shall  be  merged  into  the  body 
of  the  trust  property. 

(E)  The  trustees  shall  keep  a  record  book  of  the  benefi- 


Appe:ndix.  621 

ciaries,  and  the  number  of  beneficial  interests  owned  by  each  of 
them,  and  beneficial  interests  hereunder  sliall  be  transferable 
only  on  the  books  of  the  trustees,  and  this  may  be  done  by  bill 
of  sale,  or  upon  surrender  of  certificates  therefor  and  presenta- 
tion of  a  written  transfer  thereof.  The  acceptance  of  a  certifi- 
cate of  beneficial  interests  by  the  original  holder  or  transferee, 
shall  make  the  person  named  in  said  transfer  a  party  of  this 
instrument,  as  if  such  party  had,  in  person,  joined  in  the  execu- 
tion thereof. 

(F)  The  name  in  which  a  beneficial  interest  stands  on  the 
books  of  the  trustees,  shall  be  considered  by  the  trustees  con- 
clusive evidence  of  ownership,  and  they  shall  not  be  required 
upon  transferring  such  beneficial  interests  or  paying  dividend-i 
on  such  interests,  or  distributing  assets  upon  the  termination  of 
the  trust,  or  at  any  other  time,  to  inquire  in  any  way  into  the 
relations  between  assignor  and  assigns,  pledgor  or  pledgee, 
trustee  and  beneficiary,  guardian  and  ward,  or  in  any  other 
similar  relation,  and  shall  have  the  right  to  conclusively  pre- 
sume without  inquiry,  that  the  beneficiary,  as  shown  by  their 
books,  is  the  real  and  true  and  unconditional  owner  thereof. 

Eighth  :  Annual  meetings  for  the  election  of  trustees  and 
for  the  transaction  of  other  business  shall  be  on  the  first  Tues- 
day in  July,  following  the  first  Monday  in  July,  each  year,  com- 
mencing in  1922,  of  which  meeting  the  secretary  or  acting  sec- 
retary shall  give  notice  by  mail  to  each  trustee  at  his  registered 
address,  at  least  ten  days  before  such  meeting,  but  failure  to 
give  notice  of  such  meeting  shall  not  invalidate  the  proceedings 
of  the  meeting. 

(B)  The  trustees  may  call  the  beneficiaries  together  at  the 
annual  meeting  of  said  trustees,  upon  ten  days'  notice  given  as 
aforesaid,  at  which  meeting  the  trustees  may  submit  an  annual, 
or  such  other  reports  as  they  may  deem  advisable,  to  said  bene- 


622  Trusts  for  Business  Purposes. 

ficiaries  for  their  information,  and  the  beneficiaries,  at  such 
annual  meeting,  may  nominate  from  among  themselves,  candi- 
dates for  the  office  of  trustees,  presenting  such  nominations  to 
the  Board  of  Trustees,  but  the  election  of  such  nominees,  by  the 
trustees,  shall  be  wholly  optional  with  said  trustees.  The  fiscal 
year  shall  end  each  year  on  December  31st. 

Ninth  :  The  death  of  a  beneficiary  or  of  a  trustee  during 
the  continuance  of  this  trust,  shall  not  operate  to  terminate 
the  trust,  nor  shall  it  entitle  the  legal  representative  of  the  de- 
ceased certificate  holder  to  an  accounting,  or  to  take  any  action 
in  the  courts,  or  elsewhere,  against  the  trustees ;  but  the  execu- 
tors, administrators  or  assigns  of  any  deceased  certificate  holder 
shall  succeed  to  the  rights  of  said  decedent  under  this  trust, 
upon  surrender  for  transfer,  of  the  certificates  for  the  interests 
held  by  him. 

(B)  It  is  expressly  agreed  that  the  said  trust  shall  not  be 
terminated  or  the  administration  thereof  in  any  wise  interfered 
with  or  suspended  by  the  death  of  any  such  beneficiary,  or  his 
incapacity  for  any  reason,  or  by  his  said  interest  or  interests 
being  by  process  of  law  subjected  to  the  payment  of  debts,  or 
in  any  way  vested  in  any  heir,  assign,  creditor,  or  purchaser,  of 
the  said  beneficiary,  or  in  any  trustee,  assignee  or  officer  of 
any  court,  or  by  the  same  in  any  manner  being  divested  out  of 
the  beneficiary  and  transferred  or  vested  in  any  other  person, 
administrator,  executor,  trustee,  assignee,  or  personal  repre- 
sentative. But  any  such  person  who  may,  in  any  such  manner 
acquire  or  become  vested  with  the  ownership  of  such  certificate, 
shall  thereupon  succeed  to  and  become  entitled  to  all  the  rights 
and  equities  of  the  beneficiary  therein  named,  and  the  beneficial 
interests  in  the  said  trust  estate,  upon  surrendering  the  original 
certificate  to  the  said  trustee  with  such  proof  of  ownership  as 
may  be  reasonable  required  by  them,  and  the  issue  in  lieu 


Appendix.  623 

thereof  of  a  new  certificate,  and  notv\nthstanding  said  change  of 
ownership  or  interest  in  any  such  certificate,  or  death  or  in- 
soh'ency  of  the  original  owner  thereof,  the  said  trust  estate  shall 
continue  and  remain  in  full  force  until  terminated  as  herein  pro- 
vided. 

Tenth  :  The  trustees  hereunder  shall,  in  entering  into  con- 
tracts and  in  the  execution  of  notes,  bonds,  or  other  written 
instruments  obligatory  upon  the  said  estate,  set  forth  in  appro- 
priate terms  that  the  said  instruments  are  not  entered  into  by 
them  nor  binding  upon  them  individually,  but  only  as  trustees 
of  this  estate,  and  that  contracts  or  obligations  are  to  be  satis- 
fied or  performed  out  of  the  assets  of  said  trust  estate  only. 
But  the  failure  or  neglect  of  such  trustee  or  trustees  to  so  de- 
clare in  any  instrument,  contract  or  obligation  entered  into  for 
the  purpose  of  carrying  out  the  objects  of  said  trust,  shall  not 
be  construed  to  render  said  trustees  or  any  of  them,  individu- 
ally liable  thereon,  but  the  same  sliall  be  obligations  binding 
upon  and  performable  only  out  of  the  assets  of  said  trust  estate. 

(B)  It  is  further  expressly  agreed  that  the  said  Trustees 
are  fully  authorized  in  their  capacity  as  such  and  for  and  on 
behalf  of  said  trust,  to  receive,  collect,  receipt  and  give  full  re- 
leases, acquittances  and  discharges  for  any  sums  of  money 
which  may  be  payable  to  them  as  said  trustees,  for  the  benefit 
of  said  trust,  or  for  any  property  or  any  other  thing  of  value 
which  they  may  be  entitled  to  receive  on  behalf  of  said  trust. 

Eleventh  :  This  trust  shall  not  continue  in  any  event 
longer  than  for  the  term  of  twenty-one  years  after  the  death  of 
the  trustees  named  herein,  at  which  time  the  then  Board  of 
Trustees  shall  proceed  to  wind  up  its  afifairs,  liquidate  its  as- 
sets, and  distribute  the  same  among  the  certificate  holders  of 
the  beneficial  interests,  according  to  the  number  of  interests  held 
by  them. 


f 


624 


Trusts  for  Business  Purposes, 


(B)  For  the  purpose  of  winding  up  their  affairs  and  liqui- 
dating the  assets  of  the  trust,  the  then  Board  of  Trustees  shall 
continue  in  office  until  such  duties  have  been  performed. 

In  Witness  Whereof,  the  said  James  A.  Coopman, 
William  T.  GrablE  and  Ethel  S.  GrablE,  Trustees,  herein- 
before mentioned,  have  set  their  hands  and  seals  in  token*  of 
their  acceptance  of  the  trust  herein  specified,  for  themselves 
and  their  successors;  and  the  said  James  A.  Coopman. 
William  T.  GrablE  and  Ethel  S.  GrablE,  Subscribers,  have 
hereunto  set  their  hands  and  seals,  in  token  of  their  assent  to 
and  approval  of  said  terms  of  trust  for  themselves  and  their 
assigns,  the  day  and  year  first  above  written. 

Subscribers. 

Trustee    (Seal) 

Trustee    (  Seal) 

Trustee    (  SEal  ) 

State  oe  Illinois,   '^ 
County  of  Cook,      \  ^^• 

I, ,  a  Notary  Public  in  and  for  said  County 

aforesaid,  do  hereby  certify  that  William  T.  GrablE,  Ethel 
S.  GrablE,  and  James  A.  Coopman,  personally  known  to  me 
to  be  the  same  persons  whose  names  are  subscribed  to  the  fore- 
going instrument,  appeared  before  me  this  day  in  person,  and 
acknowledged  that  they  signed,  sealed  and  delivered  the  said 
instrument,  as  their  free  and  voluntary  act,  for  the  uses  and 
purposes  therein  set  forth. 

Given  under  my  hand  and  official  seal  this  14th  day  of  July, 
A.  D.  1922. 

Notary  Fublic. 


Appendix.  625 

CHICAGO  RAILWAY  TRUST. 

Chicago  City  and  Connecting  Railways  Collateral  Trust 
was  adjudicated  in  the  case  of  Venner  v.  Chicago  City  Ry. 
Co.,  258  111.  523;  101  N.  E.  949.  A  copy  of  the  Trust  Agree- 
ment is  as  follows: 

Trust  Agreement  as  Amended  November  7,  1910,  and  June  12, 

1911. 

Dated  January  i,  19 10. 

Trust  Agreement,  made  and  entered  into  at  Chicago,  Illi- 
nois, dated  the  first  day  of  January,  in  the  year  one  thousand 
nine  hundred  and  ten,  between 

Cobe  &  McKinnon,  a  co-partnership  composed  of  Ira  M. 
Cobf;  and  John  W.  McKinnon,  of  the  city  of  Chicago,  state 
of  Illinois,  hereinafter  called  the  "Vendors,"  parties  of  the 
first  part,  and 

Elbert  H.  Gary,  of  the  city  of  New  York,  state  of  New 
York,  and  Albert  J.  Earling,  and  Samuel  M.  Felton,  of  the 
city  of  Chicago,  state  of  Illinois,  hereinafter  called  "Trustees," 
jointly,  parties  of  the  second  part : 

Whereas,  the  Vendors  are  the  owners  or  holders,  possess- 
ing the  right  to  sell  and  assign,  and  to  transfer  and  deliver, 
certain  mortgage  bonds  and  shares  of  capital  stock  of  cor- 
porations owning  or  operating  electric  railways  in  the  city 
of  Chicago  and  vicinity,  hereinafter  more  particularly  speci- 
fied ;  and 

Whereas,  the  Vendors  propose  to  sell  and  assign,  and  to 
transfer  and  deliver  the  said  bonds  and  stock  to  the  Trustees 
upon  the  trusts  set  forth  in  this  trust  agreement  in  consid- 
eration of  the  acceptance  of  such  trusts  by  the  Trustees,  and 
of  the  issue  and  delivery  by  the  Trustees  to  the  Vendors  of 


626  Trusts  for  Business  Purposes. 

certain  five  per  cent,  bonds  and  of  certificates  of  certain  pre- 
ferred participation  shares  and  of  certain  common  participa- 
tion shares,  all  as  hereinafter  more  particularly  described; 
and 

Whereas,  the  trust  hereby  created  is  to  be  entitled  and  des- 
ignated "Chicago  City  and  Connecting  Railways  Collateral 
Trust :" 

Now,  therefore  this  indenture  witnesseth  that  in  considera- 
tion of  the  premises  and  of  the  mutual  covenants  and  agree- 
ments herein  contained  and  the  expected  performance  thereof, 
and  of  the  sum  of  one  dollar  by  them  duly  received  from  the 
Trustees,  and  for  the  purpose  of  creating  such  Chicago  City 
and  Connecting  Railway  Collateral  Trust; 

The  Vendors  have  sold,  assigned,  transferred  and  set  over, 
and  by  these  presents  do  sell,  assign,  transfer  and  set  over, 
unto 

The  trustees,  parties  of  the  second  part  hereto,  the  survi- 
vors and  survivor  of  them  and  their  successors,  as  joint  ten- 
ants and  not  as  tenants  in  common : 

I.     All  and  singular  the  following  shares  of  stock  of  the 
several  corporations,  and  of  the  aggregate  par  value,  specified 
respectively  the  certificates  of  which  several  shares  of  stock 
are  herewith  delivered  to  the  Trustees  to  wit : 
Shares. 

169,719     Chicago  City  Railway  Company  (an  Illi- 
nois corporation)  $16,971,900 

50,000     Calumet    and    South    Chicago    Railway 

Company  (an  Illinois  corporation)  5,000,000 

8,000     Southern   Street  Railway   Company    (an 

Illinois  corporation)  800,000 

10,000     Hammond,    Whiting   and    East    Chicago 


Appendix.  627 

Railway  Company   (an  Indiana  corpo- 
ration) 1,000,000 
720     Chicago    and    Western    Railway    Com- 
pany  (an  Illinois  corporation)  72,000 


$23,843,900 
II.     Also,  all  and  singular  the   following  mortgage  bonds 

of  the  several  corporations,  and  of  the  aggregate  par  values, 

specified    respectively,    which    bonds    herewith    are    delivered 

to  the  Trustees,  to  wit: 

Par  Value 

Calumet    and    South    Chicago    Railway    Company 

(Consolidated  Mortgage)  $5,000,000 

Hammond,    Whiting    and    East    Chicago    Railway 

Company   (First  Mortgage)  1,000,000 

Southern    Street   Railway   Company    (First    Mort- 
gage) 1,600,000 

Chicago    and    Western    Railway    Company    (First 

Mortgage)  74,000 


$7,674,000 

And  it  is  understood  and  agreed  that  in  case  the  Vendors 
shall  not  deliver  to  the  Trustees  the  full  amount  of  the  bonds 
in  the  foregoing  clause  II  scheduled  as  being  transferred  to 
the  Trustees,  the  Vendors  shall  have  the  right  to  deliver  in 
lieu  of  any  such  bonds  and  to  cover  any  such  shortage,  cash 
for  each  such  bond  equal  to  the  par  value  thereof ;  which  case 
from  time  to  time  thereafter  shall  be  repaid  to  the  Vendors 
in  corresponding  amounts  upon  their  delivery  to  the  Trustees 
of  the  bonds  in  lieu  of  which  such  cash  deposit  shall  have 
been  made. 

Pending  the  engraving  of  the  certificates  of  any  stock  or 


I 


628  Trusts  for  Business  Purposes. 

of  any  bonds  constituting  any  part  of  the  above  described 
securities,  or  any  securities  at  any  time  exchanged  or  substi- 
tuted therefor  or  any  part  thereof,  the  Vendors  may  deHver 
to  the  Trustees,  printed  certificates  or  printed  bonds,  substan- 
tially in  the  form  proposed  for  the  permanent  certificates  of 
stock  or  bonds.  Without  unnecessary  delay,  the  Vendors 
will  cause  to  be  prepared  engraved  certificates  of  stock  and 
bonds  to  be  exchanged  for  said  printed  certificates  of  stock 
and  bonds : 

To  have  and  to  hold,  unto  the  Trustees,  the  survivors  and 
survivor  of  them,  and  their  successors,  as  joint  tenants  and 
not  as  tenants  in  common,  all  and  singular,  the  said  shares 
of  capital  stock  and  the  said  bonds,  and  any  and  all  shares  of 
stock,  bonds  or  other  property  for  which  the  said  shares  of 
stock  or  said  bonds,  or  any  of  them,  at  any  time  may  be  ex- 
changed, or  which  at  any  time  may  be  received  by  the  Trus- 
tees as  the  holders  of  such  shares  of  capital  stock  or  such 
bonds,  and  also  any  and  all  moneys  or  other  personal  prop- 
erty resulting  therefrom  which  pursuant  to  the  provisions 
hereof  shall  come  into  the  hands  of  the  Trustees  as  part  of 
the  trust  estate — all  of  which  personal  property  hereinafter 
sometimes  is  termed  the  "trust  fund" — with  all  the  rights 
and  powers  of  stockholders  or  bondholders  or  owners  of  such 
stock  or  bonds  or  personal  property,  and,  as  hereinafter  pro- 
vided, with  full  power  of  sale  or  other  disposition  of  all  or 
any  part  thereof,  for  and  during  the  lives  of  the  following 
named  eight  persons — to  wit,  James  B.  Forgan,  John  J.  Mitch- 
ell, E.  K.  Boisot,  Harrison  B.  Riley,  John  A.  Spoor,  Edward 
Morris,  Samuel  Insull  and  Ira  M.  Cobe — and  the  life  of  the 
last  survivor  of  said  persons,  and  for  and  during  the  period 
of  twenty  years  next  ensuing  after  the  death  of  such  sur- 
vivor unless  such  sooner  shall  be  determined. 


Appendix.  629 

But  in  trust,  nevertheless,  to  hold  and  dispose  of  the  said 
trust  fund,  and  to  collect  and  receive  the  proceeds  and  in- 
come thereof  and  to  apply  and  use  the  said  trust  fund, 
proceeds  and  income,  as  in  this  trust  agreement  provided,  first, 
for  the  payment  of  the  principal  and  interest  from  time  to 
time  of  the  said  five  per  cent  bonds,  and  thereafter  for  the 
benefit  of  the  two  several  classes  of  holders  of  participation 
shares,  viz.  (i)  the  holders  from  time  to  time  of  the  pre- 
ferred participation  shares,  and  (2)  the  holders  from  time 
to  time  of  the  common  participation  shares — according  to  the 
interests  and  rights  and  the  limitations  thereof,  severally  and 
respectively,  of  each  of  such  two  classes,  collectively,  relatively 
to  the  others,  but  without  preference,  priority  or  distinction 
of  any  holder  of  any  class  over  any  other  holder  of  the  same 
class,  but  in  every  case  according  to  the  covenants  and  pro- 
visions, and  subject  to  the  conditions  and  limitations  in  this 
trust  agreement  contained  and  expressed,  that  is  to  say : 

Article  One. 

Section  i.  The  Trustees,  in  their  collective  capacity  may 
be  designated  as  the  "Chicago  City  and  Connecting  Railways 
Collateral  Trust,"  and  in  that  name  any  business  of  the  trust 
may  be  conducted,  and  any  instruments  of  writing  connected 
with  the  trust  or  its  performance  may  be  executed  by  the 
Trustees  "as  Trustees  under  the  Trust  Agreement  dated  Janu- 
ary I,  1910,  creating  the  Chicago  City  and  Connecting  Rail- 
ways Collateral  Trust,  and  not  individually." 

Section  2.  The  Committee  from  time  to  time  constituted 
under  the  provisions  of  this  trust  agreement  or  such  of  their 
number  as  may  be  empowered  to  act  in  behalf  of  the  Commit- 
tee,   hereinafter    called   the    "Committee,"    shall   possess    and 


630  Trusts  for  Business  Purposes. 

may  exercise  the  powers  and  authorities  of  the  Committee 
hereinafter  set  forth;  and  any  and  all  such  acts  or  proceedings 
in  respect  of  the  trust  fund  or  the  respective  interests  therein, 
from  time  to  time  done  or  taken  by  the  Committee,  shall  bind 
accordingly  the  holder  at  the  time  being  of  each  and  every 
participation  share,  and  the  heirs,  executors,  administrators, 
successors  and  assigns  of  such  holder,  as  fully  as  if  each  such 
holder  had  expressly  authorized  and  assented  to  each  such  act 
or  proceeding  in  the  premises. 

Section  3.  The  trustees  shall  have  power  to  perform  any 
act  and  to  execute  and  deliver  any  instrument  in  writing  in 
the  premises  which  they  may  be  instructed  to  perform  or  to 
execute  and  deliver  by  the  Committee,  acting  in  exercise  of 
the  police  powers  and  authority  upon  it  conferred  as  herein- 
after expressed. 

Section  4.  The  beneficial  interest  in  the  trust  fund  and  in 
the  proceeds  of  the  trust  fund,  and  in  the  income  and  net 
income  of  the  trust  fund  (the  several  terms,  "proceeds  of 
the  trust  fund,"  "income  of  the  trust  fund,"  and  "net  income 
of  the  trust  fund,"  being  hereinafter  in  this  article  defined) 
shall  be,  and  during  the  continuance  of  this  trust  shall  remain 
(subject  to  the  prior  obligation  of  the  outstanding  five  per 
cent  bonds  to  be  secured  by  the  collateral  trust  indenture, 
dated  January  3,  1910,  mentioned  hereinafter),  in  the  holders 
of  the  outstanding  preferred  participation  shares  and  in  the 
holders  of  the  outstanding  common  participation  shares,  sev- 
erally and  respectively,  according  to  the  relative  interests, 
preferences  and  rights,  and  the  limitations  thereof,  set  forth 
and  provided  in  this  trust  agreement,  or  expressed  or  referred 
to,  respectively,  in  the  certificates  of  such  preferred  participa- 
tion shares,  or  in  the  certificates  of  such  common  participation 
shares. 


Appendix.  631 

Section  5.  For  the  purpose  of  payment  of  the  principal  of 
the  interest  of  the  five  per  cent  bonds  secured  by  the  collat- 
eral trust  indenture,  dated  January  3,  1910,  the  "proceeds 
of  the  trust  fund"  and  "income  of  the  trust  fund"  shall  be 
deemed  to  be  and  shall  be  the  amounts  from  time  to  time  as- 
certained as  provided  in  the  collateral  trust  indenture  securing 
said  bonds. 

Section  6.  For  the  purpose  of  making  payments  upon  the 
participation  shares,  "the  net  income  of  the  trust  fund"  for 
each  fiscal  year  ending  December  31,  shall  be  deemed  to  be 
the  sum  which  shall  have  been  ascertained  by  deducting  from 
the  gross  income  however  derived  for  such  fisal  year  received 
from  said  trust  fund,  by  the  Trustees  the  following  prior 
charges — all  of  which  shall  be  paid,  or  provision  for  the  pay- 
ment thereof  shall  be  made,  before  any  payments  on  the  par- 
ticipation shares — to  wit:  (i)  All  expenses  and  losses  in- 
curred in  connection  v*^ith  the  conduct  or  administration  of 
the  trust  in  such  fiscal  year,  including,  as  part  of  such  ex- 
penses, the  compensation  of  the  Trustees,  their  agents  and 
employees,  the  compensation  and  re-imbursement  for  expenses 
of  the  trustee  and  the  sinking  fund  trustee  under  the  col- 
lateral trust  indenture,  dated  January  3,  1910,  the  compen- 
sation of  the  Committee,  and  their  agents  and  employees,  gen- 
eral expenses,  and  all  other  expenses  and  losses,  including 
the  indemnification  of  the  Trustees  and  the  Committee  against 
any  Hability  by  them  incurred  in  the  discharge  of  their  duties 
under  the  several  trusts  herein  expressed;  (2)  all  the  sums 
paid  or  reserved  for  taxes  and  assessments,  ordinary  and  ex- 
traordinary, for  such  fiscal  year  upon  the  property  consti- 
tuting the  trust  fund,  or  the  interest  therein  of  the  trustee 
under  the  collateral  trust  indenture,  dated  January  3,  1910, 
or  the  interest  therein  of  the  holders  of  any  of  the  bonds 


632  Trusts  for  Business  Purposes. 

issued  under  such  collateral  trust  indenture;  (3)  all  sums  paid 
or  reserved  for  interest  for  such  fiscal  year  on  bonds  which 
shall  have  been  issued  and  shall  be  outstanding  under  the 
said  collateral  trust  indenture,  dated  January  3,  1910;  (4) 
all  sums  paid  or  reserved  on  account  of  the  installments  for 
such  fiscal  year  of  the  sinking  fund  payment  provided  for  in 
said  collateral  trust  indenture  dated  January  3,  1910;  (5)  in- 
terest on  all  bills  payable  and  other  indebtedness  payable  out 
of  the  trust  fund — all  of  such  foregoing  payments  and  ex- 
penses being  chargeable  upon  and  being  payable  out  of  the 
principal  of  the  trust  fund  to  the  extent  that  the  income 
thereof  shall  be  insufficient  to  defray  the  same — and  (6)  an 
annual  sum  not  exceeding  $100,000  to  be  fixed  pursuant  to  the 
provisions  of  Section  2  or  Article  Four  of  this  trust  agree- 
ment. 

Such  "net  income,"  determined  as  aforesaid,  from  time  to 
time  shall  be  ascertained  and  be  declared  by  the  Committee, 
and  for  all  the  purposes  of  this  indenture,  and  of  every  cer- 
tificate issued  thereunder,  the  amount  thereof  as  so  ascertained 
and  declared,  shall  be  deemed  and  be  taken  to  be  "the  net 
income  of  the  trust  fund"  of  the  Chicago  City  and  Connect- 
ing Railways  Collateral  Trust,  and  the  Trustees  shall  be  au- 
thorized to  rely  thereupon,  and  shall  not  be  bound  to  verify 
the  same  or  to  make  any  examination  with  reference  thereto. 

Article  Two. 

Section  i.  Forthwith  upon  the  execution  and  delivery  of 
this  trust  agreemenrt,  the  Trustees  will  enter  into  a  collateral 
trust  indenture,  with  First  Trust  and  Savings  Bank,  of  the 
city  of  Chicago,  state  of  Illinois,  substantially  in  the  form  of 
the  instrument  in  writing  hereto  annexed,  marked  "Schedule", 


Appendix.  633 

and,  as  part  of  the  same  transaction,  will  assign,  transfer  and 
deliver  to,  and  pledge  with,  said  First  Trust  and  Savings 
Bank  all  and  singular  the  stocks  and  bonds  scheduled  in 
the  paragraphs  numbered  I  and  II  of  the  assigning  clause  of 
this  trust  agreement,  or  the  cash  thereunder  substituted  for 
any  of  said  bonds,  to  have  and  to  hold  the  same  unto  the  said 
First  Trust  and  Savings  Bank,  its  successor  and  successors 
and  assigns,  forever,  but  in  trust  to  secure  and  to  provide  for 
the  payment  of  certain  bonds  (herein  sometimes  termed  five 
per  cent  bonds),  payable  January  i,  1927,  and  bearing  interest 
at  the  rate  of  five  per  cent  per  annum,  and  being  in  the  form 
and  of  the  tenor  and  effect  set  forth  in  said  collateral  trust 
indenture,  for  an  aggregate  principal  sum  not  exceeding 
$22,000,000,  at  any  one  time  outstanding,  which  bonds  are  to  be 
signed  by  or  on  behalf  of  the  Trustees  under  this  trust  agree- 
ment, and  are  to  be  authenticated  by  the  trustee  under  said 
collateral  trust  indenture,  and  are  to  be  issued  and  delivered, 
received  and  transferred,  subject  to  the  covenants,  conditions 
and  provisions  set  forth  and  contained  in  said  collateral  trust 
indenture  and  in  this  indenture.  All  of  the  provisions  of  said 
proposed  collateral  trust  indenture,  hereby  are  made  a  part  of 
this  trust  agreement  so  far  as  concerns  the  rights  of  the 
holders  of  said  bonds  as  in  this  trust  agreement  declared  and 
so  far  as  concerns  the  rights,  interests,  privileges  and  immu- 
nities of  such  bondholders  and  of  the  trustee  under  said  col- 
lateral trust  indenture. 

Section  2.  Upon  the  execution  of  said  collateral  trust  in- 
denture dated  January  3,  19 10,  the  Trustees  hereunder  shall 
sign,  or  shall  cause  to  be  signed  in  their  behalf,  five  per  cent 
bonds,  in  the  form  authorized  to  be  issued  under  said  col- 
lateral trust  indenture,  for  the  aggregate  principal  sum  of 
$22,000,000,  and  shall  deliver  the  same  to  the  trustee  under 


634 


Trusts  for  Business  Purposes. 


said  collateral  trust  indenture  for  certification  by  it.  As  pro- 
vided in  said  collateral  trust  indenture,  the  trustee  there- 
under shall  be  authorized  to  redeliver  any  and  all  such  bonds, 
when  so  certified,  to  or  upon  the  order  of  the  Trustees,  and 
in  no  event  shall  it  be  bound  further  to  see  to  the  application 
of  any  such  bonds  or  their  proceeds.  Such  bonds  for  the 
aggregate  principal  sum  of  $21,440,000  upon  such  certifi- 
cation, from  time  to  time  shall  be  deliverable  upon  the  order  of 
the  Vendors.  The  remaining  $556,000  of  bonds  shall  be  de- 
livered to  the  Trustees,  or  upon  their  order,  and  shall  be  sold 
by  the  Trustees  at  and  for  the  price  of  ninety  per  cent  of  the 
par  value,  plus  accrued  interest  to  the  date  of  sale,  and  from 
time  tc>  time  the  proceeds  thereof  shall  be  used  and  applied  as 
shall  be  directed  by  the  Committee. 

Section  3.  The  said  bonds  as  herein  and  in  said  collateral 
trust  indenture  provided,  as  to  both  principal  and  interest,  shall 
be  payable  only  cut  of  the  principal  or  proceeds  and  the  in- 
come of  the  property  from  time  to  time  held  by  the  trustees 
under  said  collateral  trust  indenture,  and  no  personal  liability 
on  the  part  of  the  Trustees,  or  of  any  person  interested,  bene- 
ficially or  otherwise,  in  the  trust  fund,  shall  arise  out  of  or 
be  enforcible  because  of  the  making,  issuing  or  transfer  of  said 
bonds,  or  any  thereof. 

Section  4.  The  holders  from  time  to  time  of  the  said  five 
per  cent  bonds  and  the  interest  obligations  appertaining  thereto 
to  the  extent  of  the  principal  and  interest  thereby  represented 
shall  have  the  right,  as  provided  in  said  collateral  trust  in- 
denture, through  the  trustee  thereunder  or  otherwise,  to  en- 
force the  performance  of  the  covenants  contained  in  said  bonds 
or  in  the  collateral  trust  indenture  securing  the  same  out  of 
and  against  the  said  trust  fund  but  not  otherwise  and  the 
interests  therein  of  any  of  the  beneficiaries  hereinafter  desig- 


Appendix.  635 

nated,  but  not  against  the  Trustees  or  any  beneficiary,  indi- 
vidually. 

Article  Three. 

Section  i.  Subject  to  the  prior  obligations  of  the  five  per 
cent  bonds  as  in  Article  Two  of  this  trust  agreement  ex- 
pressed, and  subject  to  the  right  of  the  Trustees  to  apply,  or 
the  right  of  the  Committee  to  direct  the  application  by  the 
Trustees  of,  any  part  or  all  of  the  income  or  proceeds  of  the 
trust  fund,  or  any  part  of  the  trust  fund  consisting  of  cash, 
to  or  for  the  uses  or  purposes  expressed  in  Section  2,  of 
Article  Four  of  this  trust  agreement,  and  subject  also  to  the 
prior  payment  of  the  several  charges  above  mentioned  in  Sec- 
tion 6  of  Article  One,  the  sole  beneficial  interest  in  the  trust 
fund  and  in  the  net  income  and  proceeds  thereof,  shall  be 
and  during  the  continuance  of  this  trust  shall  remain  in  the 
owners  from  time  to  time  of  transferable  shares  of  beneficial 
interest. 

In  the  first  instance,  the  ownership  of  all  of  such  shares 
of  beneficial  interest,  shall  be  in  the  Vendors,  and  the  cer- 
tificates of  such  shares,  to  be  issued  by  the  Trustees  as  here- 
inafter provided,  shall  be  in  the  name  of  and  shall  be  de- 
livered to,  the  Vendors  or  their  nominees. 

Section  2.  Such  shares  of  beneficial  interest  (hereinafter 
called  "participation  shares")  shall  be  two  classes,  to  wit,  pre- 
ferred participation  shares  and  common  participation  shares. 

The  number  of  the  preferred  participation  shares  shall  be 
two  hundred  and  fifty  thousand. 

The  number  of  the  common  participation  shares  shall  be 
one  hundred  and  fifty  thousand,  and  also  such  additional  num- 
ber as  from  time  to  time  may  be  authorized  as  in  Section  4 
of  this  article  provided. 


636  Trusts  for  Business  Purposes. 

For  convenience,  the  income  payments  on  such  participation 
shares  are  herein  termed  "dividends." 

The  relative  rights  and  interests,  and  the  limitations  thereof, 
of  the  holders  of  the  preferred  participation  shares  and  of 
the  holders  of  the  common  participation  shares,  shall  be  as 
follows : 

The  holders  of  the  preferred  participation  shares  shall  be 
entitled  to  receive,  out  of  the  net  income  (as  the  term  "net 
income"  is  defined  in  this  trust  agreement)  applicable  to  such 
purpose,  theretofore  received  by  and  then  under  the  control 
of  the  Trustees,  from  the  bonds,  stocks  and  other  securities 
from  time  to  time  constituting  the  trust  fund  subject  to  this 
trust  agreement,  dividends  at  the  rate  of  $4.50  per  annum  on 
each  such  share,  payable  in  semi-annual  installments  on  the 
first  day  of  January  and  the  first  day  of  July  in  each  year. 
Such  dividends  shall  be  cumulative,  and  the  moneys  therefor 
shall  be  paid  or  shall  be  set  apart  for  payment  before  any 
dividend  on  the  common  participation  shares  shall  be  paid  or 
set  apart;  so  that  if  in  any  year  dividends  amounting  to  $4.50 
shall  not  have  been  paid  upon  any  preferred  participation 
shares,  the  deficiency  shall  be  paid  before  any  dividend  shall 
be  paid  upon  or  be  set  apart  for  the  common  participation 
shares. 

Whenever  in  any  year  after  all  such  cumulative  dividends 
in  respect  of  the  preferred  participation  shares  for  all  previ- 
ous years  shall  have  been  paid,  and  the  semi-annual  instal- 
ments for  the  current  year  shall  have  been  paid  or  set  apart 
for  payment,  any  such  applicable  net  income  shall  remain  in 
the  possession  and  under  the  control  of  the  Trustees,  such 
remaining  applicable  net  income  to  such  amount  or  amounts 
as  the  Committee  may  direct  or  approve,  but  not  in  any  such 
year  exceeding  $600,000,  shall  be  distributed  and  be  paid,  as 


App]5;ndix.  637 

a  non-cumulative  dividend  ratably  among  and  to  the  holders 
of  the  common  participation  shares. 

Whenever  in  any  year,  after  the  sum  of  $600,000  shall 
have  been  so  divided  among,  and  shall  have  been  paid  or  the 
amount  thereof  shall  have  been  set  apart  for  payment,  ratably 
on  the  common  participation  shares,  any  of  such  applicable 
net  income  shall  remain  in  the  possession  and  under  the  con- 
trol of  the  trustees,  such  remaining  applicable  net  income 
to  such  amount  or  amounts  as  the  Committee  shall  direct 
or  approve  but  not  in  any  such  year  exceeding  $1,000,000,  shall 
be  distributed  and  paid,  as  a  non-cumulative  additional  divi- 
dend to  and  among  the  holders  of  the  participation  shares ;  both 
preferred  and  common,  in  the  following  proportions,  to  wit: 
Five-eighths  of  any  such  residuary  sum  ratably  among  and 
to  the  holders  of  the  preferred  participation  shares,  and 
three-eighths  thereof  ratably  among  and  to  the  holders  of  the 
common  participation  shares. 

In  every  year  in  which  such  last  mentioned  non-cumulative 
dividend  therein  of  $1,000,000  shall  have  been  paid  as  afore- 
said, or  the  amount  thereof  set  aside  for  payment  as  afore- 
said, the  holders  of  the  common  participation  shares  shall  be 
entitled  ratably  to  receive  out  of  any  and  all  further  applicable 
net  income  remaining  in  such  year,  such  amount  or  amounts 
as  from  time  to  time  the  Committee  may  direct  or  approve. 

Upon  any  distribution  by  the  undersigned  Trustees  of  the 
stocks,  bonds  or  other  securities  constituting  the  trust  fund, 
or  the  proceeds  thereof,  in  accordance  with  the  terms  of  this 
trust  agreement,  before  any  amount  shall  be  paid  to  the  hold- 
ers of  the  common  participation  shares,  the  holders  of  the 
preferred  participation  shares  shall  be  entitled  to  receive  in 
respect  of  every  such  share  the  sum  of  $100  and  also  the 
ainount  of  any  accrued  and  unpaid,  and  the  accrued  propor- 


638  Trusts  for  Business  Purposes. 

tion  of  the  currently  accruing,  semi-annual  installment  of  the 
$4.50  cumulative  dividend,  and  after  such  amounts  shall  have 
been  paid  to  the  holders  of  the  preferred  participation  shares 
and  not  otherwise,  the  remainder  of  such  trust  fund,  or  the 
net  proceeds  thereof  (after  the  payment  of  all  charges  thereon 
or  in  respect  thereof)  shall  be  distributed  and  be  paid  to  the 
holders  of  the  common  participation  shares  ratably  according 
to  their  respective  interests. 

The  registered  holders  of  the  preferred  participation  shares 
shall  have  the  same  ratable  right  (if  any)  as  the  holders  of 
the  common  participation  shares  to  subscribe  for  and  to  take 
additional  common  participation  shares  in  case  of  any  future 
increases  in  the  number  thereof  and  if  the  opportunity  to  sub- 
scribe therefor  shall  be  offered  to  the  holders  of  participation 
shares. 

Section  3.  The  Trustees  shall  issue  certificates  of  such  pre- 
ferred participation  shares  and  such  common  participation 
shares  which  certificates,  respectively,  shall  be  in  substan- 
tially the  following  form  (the  blanks  therein  being  appropri- 
ately filled),  to  wit: 

(Form  of  Preferred  Participation  Certificate.) 

No shares. 

Chicago  City  and  Connecting  Railways  Collateral  Trust. 
Trustee's  Certificate  of  Preferred  Participation. 

The  undersigned,  as  Trustees  under  a  trust  agreement 
dated  January  i,  1910,  creating  the  trust  called  Chicago  City 
and  Connecting  Railways  Collateral  Trust,  do  hereby  certify 
that is  the  owner  of preferred  partici- 
pation shares  of  the  beneficial  interest  specifically  described 
in  said  trust  agreement. 

The  holders  of  the  preferred  participation  shares  shall  be 
entitled  to  receive,  out  of  the  net  income  (as  the  term  "net 


Appendix.  639 

income"  is  defined  in  said  trust  agreement)  applicable  to  such 
purpose,  theretofore  received  by  and  then  under  the  control 
of  the  undersigned  Trustees  from  the  bonds,  stocks  and  other 
securities  from  time  to  time  constituting  the  trust  fund  sub- 
ject to  said  trust  agreement,  dividends  at  the  rate  of  $4-50 
per  annum  on  each  such  share,  payable  in  semiannual  install- 
ments on  the  first  day  of  January  and  the  first  day  of  July 
in  each  year.  Such  dividends  shall  be  cumulative,  and  the 
moneys  therefor  shall  be  paid  or  shall  be  set  apart  for  pay- 
ment before  any  dividend  on  the  common  participation  shares 
shall  be  paid  or  shall  be  set  apart  for  payment  before  any  divi- 
dend on  the  common  participation  shares  shall  be  paid  or  be 
set  apart;  so  that  if  in  any  year  preferential  dividends  amount- 
ing to  $4.50  shall  not  have  been  paid  upon  any  preferred 
participation  shares,  the  deficiency  shall  be  paid  before  any 
dividend  shall  be  paid  upon  or  set  apart  for  the  common 
participation  shares;  and  as  stated  in  said  trust  agreement, 
the  holders  of  such  preferred  participatiqn  shares  shall  be 
entitled  also  to  preference  upon  any  distribution  of  the  trust 
fund  or  the  proceeds  thereof. 

Under  the  provisions  of  said  trust  agreement,  the  holders 
of  certificates  of  participation  shares  registered  as  in  said 
trust  agreement  required,  will  be  entitled  to  exercise  certain 
voting  powers,  limited  relatively  as  between  the  preferred 
participation  shares  and  the  common  participation  shares,  as 
well  as  in  other  respects;  and  they  shall  possess  also  certain 
other  dividend  rights,  all  as  specified  in  the  said  trust  agree- 
ment. 

All  the  provisions  of  said  trust  agreement  are  hereby  made 
a  part  hereof,  in  all  respects  and  with  like  efi'ect  as  though 
the  same  were  herein  set  forth  at  length;  and  except  only  as 
in  said  trust  agreement  mentioned  and  provided,  this  certifi- 


640  Trusts  for  Business  Purposes. 

cate  confers  no  rights,  powers,  privileges  or  interest. 

The  participation  shares  represented  by  this  certificate  are 
transferable  only  upon  the  books  of  the  Trustees,  in  person  or 
by  attorney,  upon  surrender  of  this  certificate.  This  cer- 
tificate shall  not  become  or  be  valid  until  countersigned  by 
the   Registrar  of  Transfers. 

In  testimony  whereof,  the  Trustees  have  signed  this  cer- 
tificate by  their  agent  duly  authorized  this day 

of 


As  Trustees  under  the  Trust  Agreement  Dated  January  i, 
19 10  Creating  the  Chicago  City  and  Connecting  Railways 
Collateral  Trust,  and  Not  Individually. 

By , 

Their  Agent  duly  authorized. 

(Form  of  Common  Participation  Certificate.) 

No Shares. 

Chicago  City  and  Connecting  Railways  Collateral  Trust. 
Trustees'  Certificate  of  Common  Participation. 
The  undersigned,  as  Trustees  under  a  trust  agreement  dated 
January  i,  19 10,  creating  the  trust  called  Giicago  City  and 
Connecting  Railways  Collateral  Trust,  do  hereby  certify  that 
is  the  owner  of common  participa- 
tion shares  of  the  beneficial  interest  specifically  described  in 
said  trust  agreement. 

The  rights  of  the  holders  of  common  participation  shares  are 
subject  to  the  prior  rights  of  the  holders  of  the  preferred  par- 
ticipation shares,  as  set  forth  in  said  trust  agreement. 

The  number  of  the  common  participation  shares  may  be  in- 


Appe:ndix.  641 

creased  in  the  manner,  and  subject  to  the  provisions,  set  forth 
in  the  said  trust  agreement. 

Under  the  provisions  of  said  trust  agreement,  the  holders  of 
certificates  of  participation  shares  registered  as  in  said  trust 
agreement  required,  will  be  entitled  to  exercise  certain  voting 
powers,  limited  relatively  as  between  the  two  classes  as  well  as 
in  other  respects,  all  as  specified  in  the  said  trust  agreement. 

All  the  provisions  of  said  trust  agreement  are  hereby  made  a 
part  hereof,  in  all  respects  and  with  like  effect  as  though  the 
same  were  herein  set  forth  at  length ;  and  except  only  as  in 
said  trust  agreement  mentioned  and  provided,  this  certificate 
confers  no  rights,  powers,  privileges  or  interest. 

The  participation  shares  represented  by  this  certificate  are 
transferable  only  upon  the  books  of  the  Trustees,  in  person  or 
by  attorney,  upon  surrender  of  this  certificate.  This  certificate 
shall  not  become  or  be  valid  until  countersigned  by  the  Regis- 
trar of  Transfers. 

In  testimony  whereof,  the  Trustees  have  signed  this  certifi- 
cate by  their  agent  duly  authorized  this day  of 


As  Trustees  under  the  Trust  Agreement  Dated  January  i,  19 10, 
Creating  the  Chicago  City  and  Connecting  Railways  Collat- 
eral Trust,  and  not  individually. 

By.. ., 

Their  Agent  duly  authorized. 

Each  of  such  certificates,  in  the  appropriate  blanks  therefor, 
respectively,  shall  recite  the  name  of  the  holder,  and  the  num- 
ber of  participation  shares  represented  by  such  certificate. 

No  certificate  shall  be  issued  to  represent  less  than  one  whole 
participation  share  of  either  class. 


642 


Trusts  for  Business  Purposes. 


Such  certificates  may  be  signed  by  the  Trustees,  or  in  their 
behalf  by  their  agent  authorized  as  provided  in  section  2  of 
Article  Five  of  this  trust  agreement.  From  time  to  time,  the 
committee  may  direct  tliat  such  certificates  shall  bear  also  the 
counter  signature  of  the  secretary  of  the  Committee. 

The  persons  or  corporations  who  from  time  to  time  shall  be 
Trustees  or  Trustee  under  this  trust  agreement,  either  in  their 
or  its  own  name  as  such  Trustees  or  Trustee,  or  in  the  names 
of  the  said  parties  of  the  first  part  may  cause  to  be  signed,  and 
may  issue  any  and  all  certificates  of  participation  shares  which 
theretofore  shall  not  have  been  signed  by  or  in  behalf  of  the 
parties  of  the  first  part. 

On  the  back  of  each  such  certificate  shall  be  endorsed  a  form 
of  transfer  of  the  particijmtion  shares  represented  thereby,  sub- 
stantially as  follows : 

For    value    received,    hereby    sell,    assign    and 

transfer participation    shares    represented   by   the 

within   Certificate  to ,   subject   to   the  terms   and 

conditions  of  the  trust  agreement  within  referred  to,  and  to  all 
rules  concerning  such  transfer  which  have  been,  or  from  time 
to  time,  or  at  any  time,  may  be  established  by  the  within  named 
Trustees;  to  which  trust  agreement  and  rules,  the  transferee 
and  every  holder  hereof  does  assent  by  the  acceptance  of  this 

transfer;  and  do  appoint attorney  to  transfer  said 

certificate  on  the  books  of  said  Trustees  accordingly,  with  full 
power  of  substitution  in  the  premises. 

Dated  this day  of 19 .  . . 

(Seal) 

In  the  presence  of 

,  Witness. 

Section  4.  From  time  to  time,  and  at  any  time  during  the 
continuance  of  the  trust,  the  registered  holders  of  a  majority 


Appendix,  643 

of  the  total  number  of  common  participation  shares,  either  by 
a  writing  signed  by  them  and  duly  acknowledged  or  proved  in 
the  manner  provided  by  law  in  respect  of  the  execution  of  deeds 
of  real  property  to  be  recorded  in 'the  state  of  Illinois,  or  by 
vote  at  a  meeting  of  the  holders  of  participation  shares  held  as 
in  this  trust  agreement  provided,  may  authorize  the  Trustees 
to  increase  the  number  of  the  common  participation  shares  in 
the  amount  specified  in  such  writing  or  in  such  vote,  and  ac- 
cordingly to  issue  certificates  thereof  in  substantially  the  same 
form  as  the  certificates  of  the  common  participation  shares  then 
outstanding.  Such  writing  or  such  vote  also  may  specify  the 
terms  and  the  consideration  on  and  for  which  the  Trustees  mav 
sell  or  otherwise  may  dispose  of  such  additional  shares,  and  in 
the  absence  of  any  such  specification  the  Trustees  may  sell  or 
otherwise  may  dispose  of  such  additional  shares  on  such  terms 
and  for  such  consideration  as  may  be  stated  and  fixed  by  the 
Committee,  and  without  offering  to  the  holders  of  participation 
shares  the  opportunity  of  subscribing  for  such  additional  shares. 
Any  and  all  action  taken  by  the  Trustees  pursuant  to  the  pro- 
visions of  this  section  shall  bind  the  holders  of  each  and  every 
of  the  participation  shares,  as  though  all  of  them  had  expressly 
assented  thereto. 

Section  5.  The  Trustees  shall  keep,  or  shall  cause  to  be  kept 
in  the  city  of  Chicago,  state  of  Illinois,  or  in  the  city  of  New 
York,  state  of  New  York,  or  in  each  of  said  cities,  transfer 
books  in  which  shall  be  registered  the  names  of  the  several  hold- 
ers of  the  participation  certificates,  together  with  the  post-office 
address  of  each  as  given  by  him  for  such  purpose.  Such  par- 
ticipation certificates  shall  be  transferable  only  on  such  books 
of  the  Trustees,  to  be  kept  by  them  or  under  their  direction  in 
the  city  of  Chicago,  state  of  Illinois,  or  in  the  city  of  New 
York,  state  of  New  York,  upon  due  execution  of  a  transfer 


644 


Trusts  for  Business  Purposes. 


substantially  in  the  form  endorsed  on  the  back  of  such  certifi- 
cates, and  on  surrender  thereof,  by  the  registered  holder  in 
person  or  by  attorney  duly  authorized,  and  in  accordance  and 
upon  compliance  with  such  rules  and  requirements  as  from 
time  to  time  or  at  any  time  the  Trustees  may  establish  or  pro- 
mulgate. Until  so  transferred,  the  Trustees  and  all  other  per- 
sons may  treat  the  registered  holders  as  the  owners  of  said 
participation  certificates  for  all  purposes  whatsoever,  and  none 
of  them  shall  be  affected  by  any  notice  to  the  contrary. 

The  said  transfer  books  may  be  directed  to  be  closed  by  the 
Trustees  and  accordingly  the  same  shall  be  closed  at  and  during 
any  period  prior  to  the  date  of  any  dividend  or  distribution 
upon  the  participation  shares,  or  prior  to  the  date  of  any  meet- 
ing of  the  holders  of  the  participation  shares.  The  Trustees 
shall  close  the  transfer  books  also  at  any  time  and  for  such 
period  as  the  Committee  shall  request. 

Section  6.  All  certificates  before  issue,  shall  be  registered 
by  a  trust  company  of  the  city  of  Chicago  from  time  to  time 
designated  in  writing,  by  the  Trustees,  as  the  register  of  trans- 
fers, and  such  registration  shall  be  noted  on  the  certificates. 
The  Trustees  may  appoint  also  a  trust  company  in  the  city  of 
New  York  as  the  registrar  of  transfers  and  such  registration 
shall  be  noted  on  the  certificates.  No  such  participation  certifi- 
cates, unless  so  registered  by  the  registrar  of  transfers  in  Chi- 
cago, or  the  registrar  of  transfers  in  New  York,  shall  be  of 
any  validity  or  shall  be  entitled  to  share  in  the  benefits  of  this 
trust  agreement. 

The  Trustees  from  tim.e  to  time,  may  appoint  one  or  more 
transfer  agents  in  Chicago,  and  one  or  more  transfer  agents  in 
the  city  of  New  York.  The  registrar  of  transfers  in  Chicago 
may  act  also  as  transfer  agent  in  New  York.    The  registrar  of 


AppiiNDix.  64s 

transfers   in   New   York   may  act  also  as   transfer  agent   in 
Chicago. 

The  Trustees,  by  an  instrument  in  writing,  signed  by  them, 
from  time  to  time  and  at  any  time  may  appoint  another  trust 
company  in  Chicago  or  in  New  York  to  act  as  registrar  of 
transfers  in  Chicago,  or  New  York,  respectively,  in  place  of 
the  registrar  of  transfers  theretofore  appointed,  and  may  ap- 
point successors  to  the  transfer  agent,  or  agents,  in  Giicago,  or 
New  York,  theretofore  appointed. 

Section  7.  Pending  the  preparation  of  the  engraved  certifi- 
cates to  be  issued  under  this  trust  agreement,  the  Trustees  may 
issue  and  deliver  printed  certificates  substantially  in  the  form 
of  the  definitive  certificates  hereinbefore  recited,  and  each  of 
said  printed  certificates  shall  be  marked  "Temporary." 

Such  temporary  certificates  shall  be  registered  by  the  regis- 
trar or  transferred  in  the  same  manner  as  herein  provided  in  re- 
spect of  the  engraved  certificates. 

Such  temporary  certificates  duly  issued  and  registered  here- 
under from  time  to  time,  shall  be  exchangeable,  at  the  ofiice  or 
agency  of  the  Trustees  in  the  City  of  Chicago,  without  expense 
to  the  holder,  for  engraved  certificates.  Such  temporary  cer- 
tificates, until  engraved  certificates  are  prepared  for  delivery, 
shall  be  transferable  in  the  same  manner  as  the  certificates. 

Without  unnecessary  delay  the  Trustees  will  cause  to  be  pre- 
pared such  engraved  certificates,  to  be  exchanged  for  such  tem- 
porary certificates,  upon  surrender  thereof  to  the  Trustees. 

Section  8.  In  case  any  certificate  shall  become  mutilated,  or 
shall  be  lost  or  destroyed,  the  Trustees,  on  evidence  satisfactory 
to  them  that  it  has  been  mutilated,  lost  or  destroyed  and  on  such 
terms  if  any  as  to  indemnity  and  otherwise  as  the  Trustees  shall 
deem  proper,  may  issue  a  new  certificate  in  the  name  of  the 
registered  holder  of  such  former  certificate. 


646 


Trusts  for  Business  Purposes. 


Section  9.  Every  transfer  (otherwise  than  by  operation  of 
law)  of  any  certificate  and  the  said  participation  shares  repre- 
sented thereby  shall  be  in  writing  (substantially  in  the  form 
hereinbefore  recited)  under  the  hand  of  the  registered  holder, 
and  upon  delivery  of  such  writing  together  with  the  existing  cer- 
tificate to  the  Trustees  or  their  transfer  agent,  such  transfer 
shall  be  recorded  on  the  transfer  books,  and  a  new  certificate  for 
such  shares  so  transferred  shall  be  given  to  the  transferrer,  and 
in  case  of  a  transfer  of  a  part  only  of  the  shares  represented  by 
the  certificate,  a  new  certificate  for  the  untransferred  shares 
shall  be  given  to  the  transferrer.  Until  the  transfer  shall  be  so 
delivered  and  recorded,  the  registered  holder  of  a  certificate 
shall  be  deemed  to  be  the  holder  of  the  participation  shares 
thereby  represented  for  all  the  purposes  of  the  trusts  hereof 
and  neither  the  Trustees  nor  the  Committee  shall  be  affected  by 
any  notice  of  any  unrecorded  transfer. 

Section  10.  Whenever  in  consequence  of  the  death,  bank- 
ruptcy or  insolvency  of  the  holder  of  any  certificate,  or  in  any 
way  other  than  by  a  transfer  in  accordance  with  the  preceding 
Section  9,  any  person  shall  become  entitled  to  any  certificate, 
and  shall  produce  proper  evidence  of  his  title  and  shall  surren- 
der such  certificate  to  the  Trustees  or  their  transfer  agent,  he 
shall  be  registered  in  the  transfer  books  as  the  holder  of  the 
shares  represented  by  such  surrendered  certificate  and  shall  re- 
ceive a  new  certificate  for  the  same. 

Section  11.  Certificates  and  the  interests  thereby  repre- 
sented shall  be  personal  property  and  the  certificates  shall  en- 
title the  holders  thereof  only  to  the  rights  and  interests  in  the 
trust  fund  as  set  forth  in  this  trust  agreement. 

Section  12.  Two  or  more  persons  holding  any  certificate 
shall  be  joint  tenants  of  the  entire  interests  represented  thereby 
and  no  entry  shall  be  made  in  any  certificate  or  in  the  transfer 


Appendix.  647 

books  that  any  person  is  entitled  to  any  future  limited  or  con- 
tingent interest  in  any  certificate.  But  subject  to  the  provisions 
hereinafer  contained,  any  person  registered  as  the  holder  of  any 
certificate  may  be  described  therein  as  a  trustee  of  any  kind,  and 
words  may  be  added  to  the  description  to  identify  the  trust. 

Section  13.  The  Trustees  shall  not,  nor  shall  the  Committee 
or  any  transfer  agent  or  other  agent  of  the  Trustees  or  the 
Committee,  or  the  holder  of  any  certificate,  be  bound  to  take 
notice  of  any  trust  whether  express,  implied  or  constructive,  or 
of  any  charge  or  equity  concerning  any  certificate  or  the  inter- 
est in  the  trust  fund  of  the  holder  of  any  certificate.  Except  as 
noted  in  the  certificate  or  in  the  transfer  book,  neither  shall 
they  be  bound  to  ascertain  or  inquire  as  to  the  authorit)'-  for 
any  sale  or  transfer  of  any  such  certificate  or  interest  by  any 
registered  certificate  holder  or  his  personal  representatives,  or 
to  recognize  any  person  as  having  any  interest  therein  except 
the  persons  registered  as  such  certificate  holders.  The  receipt 
or  voucher  of  the  person  in  whose  name  any  certificate  is  regis- 
tered, or  if  such  certificate  be  registered  in  the  names  of  more 
than  one  person,  the  receipt  or  voucher  of  any  one  of  such 
persons,  shall  be  a  sufficient  discharge  for  all  dividends  and 
other  money  payable  in  respect  of  such  certificate  and  from  all 
responsibility  in  respect  of  the  application  thereof. 

Section  14.  Unless  express  notice  to  the  contrary  shall  have 
been  received  by  the  Trustees,  they  may  deem  and  may  treat 
any  person  who  shall  present  a  participation  certificate,  together 
with  a  transfer  thereof  signed  by  the  registered  holder  of  such 
certificate,  as  the  bona  fide  owner  of  such  certificate,  and  ac- 
cordingly on  demand  they  may  transfer  the  shares  thereby 
represented. 


648 


Trusts  for  Business  Purposes. 


Article  Four. 

Section  i.  Subject  to  the  paramount  rights  of  the  First 
Trust  and  Savings  Bank  or  its  successor,  as  trustee  under  the 
collateral  trust  indenture  securing  the  five  per  cent  bonds,  and 
of  the  holders  of  such  bonds  under  the  provisions  of  said  in- 
denture as  creditors,  the  Trustees  shall  receive  all  interest,  divi- 
dends or  income  of  the  trust  fund;  and,  first,  after  the  ascer- 
tainment and  determination  of  "the  income  of  the  trust  fund" 
as  provided  in  the  collateral  trust  indenture  securing  the  five 
per  cent  bonds,  from  time  to  time  shall  apply  such  income  to 
the  payment  of  the  interest  on  said  bonds,  as  and  when  the  same 
shall  become  due  and  payable,  and  to  the  payment  of  the  annual 
sinking  fund  installment  as  and  when  required  to  be  paid  by 
said  collateral  trust  indenture;  and,  next,  after  the  ascertain- 
ment and  determination  of  the  amount  of  "the  net  income  of 
the  trust  fund"  as  provided  in  Section  6  of  Article  One  of  this 
trust  agreement,  and  after  the  making  of  the  several  payments, 
provisions  and  reser\^ations  specified  in  said  Section  6  of  Article 
One,  from  time  to  time  shall  apply  such  "net  income  of  the 
trust  fund"  to  the  payment  of  the  sums  distributable  to  the 
holders  of  the  participation  shares  according  to  the  relative 
rights  and  limitation  of  rights  of  the  two  classes  of  such  shares, 
as  herein  specified. 

Section  2.  So  far  as  lawfully  may  be  done,  in  any  year,  after 
payment  of  the  interest  due  on  the  five  per  cent  bonds,  and  the 
sinking  fund  installment  for  the  then  current  year,  the  Trus- 
tees may,  and  upon  the  request  of  the  Committee,  the  Trustees 
shall,  set  apart  out  of  the  "net  income  of  the  trust  fund,"  as 
and  for  a  "surplus  fund,"  such  sums  if  any,  not  to  exceed 
$100,000  in  any  one  fiscal  year,  as  the  Committee  ■  may  direct. 
Such  "surplus    fund,"   shall  be  applied  and  be  used  by  the 


Appendix.  649 

Trustees,  from  time  to  time  upon  the  direction  or  approval  of 
the  Committee,  in  such  way  and  for  such  purposes  (v/hich  may- 
include  the  payment  of  the  cumulative  semi-annual  dividends 
of  $2.25  per  share  on  the  preferred  participation  shares),  as 
the  Committee  shall  deem  advisable. 

Out  of  the  proceeds  of  any  or  all  of  the  $556,000  of  five  per 
cent  bonds  hereinabove  authorized  to  be  sold  by  the  Trustees, 
the  Trustees  shall  pay  all  expenses  connected  with  the  organiza- 
tion of  this  trust,  including  the  preparation  of  all  writings  or 
instruments  incident  thereto,  the  preparing,  engraving,  issuance 
and  certification  of  the  five  per  cent  bonds  and  the  certificates 
of  preferred  shares  and  common  shares  herein  provided  for, 
and  they  may  add  the  balance  remaining  to  the  aforesaid 
"surplus  fund." 

From  time  to  time  upon  the  request  of  the  Committee  the 
Trustees  shall  pay  to  the  Committee  or  its  order,  out  of  any 
funds  in  the  hands  of  the  Trustees  available  for  tliat  purpose, 
such  sums  or  amounts  as  the  Committee  shall  in  writing  re- 
quest for  use  by  the  Committee  in  payment  and  discharge  of 
expenses,  obligations  and  liabilities  incurred  by  or  on  behalf 
of  the  Committee  in  the  administration  of  this  trust. 

Anything  in  this  trust  agreement  to  the  contrary  notwith- 
standing all  income  of  the  trust  fund  shall  be  distributed  in 
accordance  with  the  provisions  of  this  indenture  on  or  before 
January  i,  1931. 

Section  3.  In  the  event  that  any  bond  constituting  part  of 
the  trust  fund  shall  be  paid  or  be  redeemed,  or  in  the  event 
that  the  property  of  any  of  the  corporations,  whose  capital 
stock,  or  any  part  thereof,  at  any  time  shall  constitute  any  part 
of  the  trust  fund,  shall  be  sold,  and  the  proceeds  thereof  dis- 
tributed to  the  holders  of  the  capital  stock  of  such  corporation, 
and  as  a  result  thereof  any  moneys  shall  come  into  the  hands 


650 


Trusts  for  Business  Purposes, 


of  the  Trustees,  or  in  the  event  that  any  of  the  capital  or  the 
principal  represented  by  any  of  the  trust  fund  securities  or 
any  part  thereof  shall  be  distributed  or  be  paid  over  to  the 
Trustees — then,  in  any  such  event,  any  amount  or  amounts  so 
received  or  distributed  or  paid  over  shall  be  applied  by  the  Trus- 
tees, first  to  the  prepayment  or  redemption  of  the  five  per  cent 
gold  bonds,  or  otherwise,  in  accordance  with  the  provisions  of 
the  collateral  trust  indenture,  securing  such  bonds;  and  (sub- 
ject to  the  reservations  above  stated  in  section  6  of  Article  One 
of  this  trust  agreement)  ;  second,  ratably  to  and  among  the 
holders  of  preferred  participation  shares  then  outstanding  until 
the  sum  of  $100  shall  have  been  paid  v.-ith  respect  to  each  of  the 
said  preferred  shares,  together  with  any  accrued  and  unpaid 
semi-annual  cumulative  dividends  of  $2.25  per  share  and  the 
proportionate  amount  then  accrued  of  such  dividend  then  cur- 
rently accruing ;  and  third,  ratably  to  and  among  the  holders  of 
common  participation  shares. 

Section  4.  Whenever  the  full  amount  payable  upon  any 
preferred  participation  shares  as  specified  in  the  preceding 
section  3  of  this  article  shall  have  been  paid,  or  the  amount 
thereof  shall  have  been  set  aside  for  payment  when  and  as 
called  for  by  the  holders  of  such  shares,  then  and  thereupon  all 
interest  of  the  then  present  or  any  future  holders  of  such  shares, 
or  of  any  certificate  thereof,  in  the  trust  fund,  or  in  any  income 
realized  therefrom,  forthwith  shall  cease  and  determine,  and  the 
certificate  representing  every  such  share  shall  be  surrendered  to 
the  Trustees,  and  shall  be  cancelled  and  not  reissued. 

Section  5.  In  case  any  sums  amounting  to  less  than  $100  on 
account  of  principal  or  capital  shall  have  been  paid  upon  any 
preferred  participation  share,  or  shall  have  been  set  aside  for 
payment  thereon  upon  the  order  of  the  holder  thereof  (no  such 
payment,  however,  to  be  made  except  upon  production  of  the 


Appendix.  651 

certificate,  in  order  that  the  amount  of  any  such  payment  may 
be  stamped  thereon),  the  amount  to  which  the  holder  of  such 
certificate  thereafter  shall  be  entitled,  with  respect  to  each  of 
said  shares  represented  by  such  certificate,  either  on  account  of 
dividends  or  principal,  shall  be  reduced  in  the  proportion  that 
the  aggregate  amount  of  all  such  payments  on  account  of  cap- 
ital or  principal  shall  bear  to  $100. 

Section  6.  Nothing  in  this  trust  agreement  or  in  any  partici- 
pation certificate  issued  hereunder,  either  expressed  therein  or 
to  be  implied  therefrom,  is  intended  or  shall  be  construed  to 
give  to  any  person  or  corporation  other  than  the  parties  hereto, 
the  trustee  under  the  collateral  trust  indenture  securing  the  five 
per  cent  bonds,  the  holders  of  such  bonds,  and  the  holders  of 
participation  certificates  issued  under  this  trust  agreement  and 
registered  as  herein  provided,  any  legal  or  equitable  right,  rem- 
edy or  claim  under  or  in  respect  of  this  trust  agreement,  or 
any  covenant,  condition  or  provision  herein  contained,  or  any 
right,  title,  or  interest  in  or  to  any  property  herein  described 
or  subject  to  the  provisions  hereof ;  all  the  covenants,  provisions 
and  conditions  of  this  trust  agreement  and  of  said  participation 
certificates  being  intended  to  be,  and  being,  for  the  sole  and 
exclusive  benefit  of  the  parties  to  this  trust  agreement  and  the 
several  other  persons  in  this  section  mentioned. 

Section  7.  Subject  to  the  provisions  of  the  indenture  secur- 
ing the  five  per  cent  bonds,  the  Trustees  shall  have  the  right  to 
vote  upon  any  and  all  shares  of  stock  constituting  any  part  of 
the  trust  fund,  at  any  and  all  meetings,  regular  or  special,  of 
the  corporation  or  corporations  issuing  such  stocks ;  and,  sub- 
ject to  the  terms  and  provisions  of  this  trust  agreement,  the 
Trustees  may  take  any  action  or  may  give  or  execute  any  con- 
sent or  may  take  any  step  which  the  owners  of  such  stock 
would  be  entitled  or  authorized  to  take,  give  or  execute,  with 


652 


Trusts  for  Business  Purposes. 


the  same  force  and  effect  as  though  at  the  time  the  Trustees 
were  the  absolute  owners  of  such  stock;  and  from  time  to  time 
the  Trustees  may  give  proxies  to  any  person  or  persons  to  vote 
such  stock ;  but  in  voting  upon  any  of  such  stock  the  Trustees 
shall  follow  the  directions  or  instructions,  if  any,  that  may  be 
given  to  the  Trustees  by  the  committee,  and  shall  cause  their 
proxies  also  to  follow  such  directions  or  instructions. 

In  voting  or  in  causing  to  be  voted  any  such  stock,  the  Trus- 
tees (and  Committee  when  giving  any  such  written  directions 
or  instructions  to  the  Trustees),  from  time  to  time  will  exer- 
cise their  best  judgment  to  elect  suitable  directors  of  the  cor- 
poration issuing  such  stock,  to  the  end  that  the  affairs  of  such 
corporation  shall  be  properly  managed.  In  voting  and  in  act- 
ing on  any  other  matters  which  shall  come  before  the  Trustees 
as  stockholders,  or  at  stockholders'  meetings,  the  Trustees  (and 
the  Committee  when  giving  any  such  written  directions  or  in- 
structions to  the  Trustees),  likewise  will  exercise  their  best 
judgment.  Nevertheless,  the  Trustees  assume  no  personal  re- 
sponsibility, and  shall  be  under  no  personal  obligation  in  respect 
of  such  management  or  in  respect  of  any  action  by  them  taken 
or  taken  in  pursuance  of  their  consent  thereto  as  such  stock- 
holders or  in  pursuance  of  their  votes  cast. 

Section  8.  Any  income  of  the  trust  over  and  above  the  in- 
come derived  from  the  stocks,  bonds,  or  other  securities  held 
by  the  trustee  under  the  collateral  trust  indenture  securing  the 
five  per  cent  bonds,  shall  be  applied  and  be  used  by  the  Trus- 
tees, in  such  manner  as  the  Committee  shall  request,  not  in  dis- 
regard of  any  express  provision  of  this  agreement. 

Section  9.  In  case  the  Trustees  shall  acquire  any  interest  in 
real  estate,  as  proceeds  or  income  of  the  deposited  securities, 
they  shall  hold  the  same,  subject  to  the  terms  of  this  trust  agree- 
ment, for  sale  or  other  conversion  into  personal  property;  and, 


Appendix.  653 

at  all  times,  all  such  real  estate  sliall  be  considered  and  be 
treated  as  personal  property  for  the  purposes  of  this  trust. 

Section  10.  Any  of  the  Trustees  may  purchase,  acquire  and 
own  any  of  the  five  per  cent  bonds  or  any  of  the  participation 
shares  free  from  accountability  with  respect  thereto,  and  may 
deal  therein  in  all  respects  the  same  as  any  other  person,  either 
with  any  holder  of  such  bonds  or  with  any  holder  of  such  par- 
ticipation shares,  or  with  any  other  person. 

Section  11.  At  any  time  prior  to  the  happening  of  the  event 
hereinbefore  fixed  for  the  termination  of  this  trust,  upon  the 
written  request  of  a  majority  of  the  members  of  the  Committee 
and  of  the  trustee  under  the  collateral  trust  indenture  securing 
the  five  per  cent  bonds,  or  of  such  majority  and  of  the  trustee 
under  any  instrument  securing  any  bonds  issued  to  pay  of? 
said  five  per  cent  bonds  as  hereinafter  provided,  the  Trustees 
shall  terminate  this  trust,  and  shall  sell  and  dispose  of  the 
trust  fund,  upon  such  terms  as  shall  be  approved  by  the  Com- 
mittee and  such  trustee;  provided,  always,  however,  that,  in 
event  of  any  such  termination  of  this  trust,  the  trust  fund 
never  shall  be  so  sold  or  disposed  of  except  on  such  terms  as 
after  payment  of  all  prior  costs,  charges  and  expenses,  will 
produce  cash  sufficient  to  pay  at  par  the  principal  and  interest 
of  all  said  five  per  cent  bonds  at  the  time  outstanding,  or  of 
all  of  the  then  outstanding  bonds  issued  for  the  purpose  of  pay- 
ing oflf  said  five  per  cent  bonds  as  hereinafter  provided.  In  the 
event  of  any  such  sale  or  disposition  of  the  trust  fund,  the  net 
proceeds  shall  be  applied  by  the  Trustees,  first,  to  the  prepay- 
ment at  par  of  the  then  outstanding  five  per  cent  bonds,  or  of 
any  then  outstanding  bonds  issued  to  pay  off  said  bonds,  in 
accordance  with  the  indenture  securing  the  bonds,  so  paid ;  and 
(subject  to  the  reservations  above  specified  in  section  6  of 
Article  One  of  this  trust  agreement),  second,  ratably  to  and 


654  Trusts  for  Business  Purposes. 

among  the  holders  of  preferred  participation  shares,  then  out- 
standing, until  (including  any  previous  payments)  the  sum  of 
$100  shall  have  been  paid  with  respect  to  each  of  the  said 
shares,  together  with  accrued  and  unpaid  semi-annual  cumula- 
tive dividends  of  $2.25  per  share  and  the  proportionate  amount 
then  accrued  of  such  dividend  then  currently  accruing;  and 
third,  ratably  to  and  among  the  holders  of  the  common  partici- 
pation shares.  In  case  said  trust  fund  shall  be  so  sold  and 
disposed  of  partly  for  cash  (sufficient  in  amount  to  pay  the 
principal  and  interest  of  said  bonds  as  hereinbefore  provided), 
and  partly  for  securities  or  other  property,  the  Committee  ( i ) 
shall  place  a  valuation  upon  such  securities  or  property,  and  in 
case  such  valuation  shall  be  approved  in  writing  by  every  Trus- 
tee, such  securities  and  other  property  shall  be  distributed  in 
kind  to  the  holders  of  the  participation  shares  as  hereinbefore 
provided ;  but  otherwise  such  securities  and  other  property 
shall  be  sold  at  public  auction  and  the  proceeds  thereof  shall  be 
distributed  to  the  holders  of  said  participation  shares  as  afore- 
said. Any  valuation  so  made  by  the  Committee  with  the  ap- 
proval of  the  Trustees  and  any  sale  so  made  by  the  Trustees 
shall  be  conclusive  upon  all  persons  interested  in  the  trust  fund. 
At  any  such  sale  at  public  auction,  any  Trustee,  or  any  member 
of  the  Committee,  without  further  accountability  (except  for 
the  purchase  price)  may  bid  for  and  purchase  any  property  so 
sold. 

If,  pursuant  to  the  provisions  of  the  ordinance  of  the  city  of 
Chicago  in  respect  of  the  Chicago  City  Railway  Company, 
passed  February  11,  1907  the  city  of  Chicago  or  its  authorized 
licensee  shall  purchase  the  property  of  the  Chicago  City  Rail- 
way Company,  the  Trustees  shall  terminate  this  trust,  and 
thereupon  shall  sell  and  dispose  of  the  residue  of  the  trust  fund 
upon  such  terms  as  shall  be  approved  by  the  Committee.     In 


Appe;ndix.  655 

event  of  such  termination  of  this  trust,  the  net  proceeds  of  the 
trust  fund  shall  be  applied,  first  (a)  in  case  of  such  purchase 
under  the  terms  of  said  ordinance  by  the  city  of  Chicago,  to  the 
prepayment  at  par  and  interest  of  the  then  outstanding  five  per 
cent  bonds,  or  (b)  in  case  of  such  purchase  under  the  terms 
of  said  ordinance  by  the  authorized  licensee  of  the  city  of 
Chicago,  to  the  prepayment  of  said  five  per  cent  bonds,  then 
outstanding  at  par  and  a  premium  of  five  per  cent,  together 
with  interest,  all  in  accordance  with  the  indenture  securing  the 
bonds  so  paid;  and,  in  either  case  (subject  to  the  reservations 
above  specified  in  section  6  of  Article  One  of  this  trust  agree- 
ment), second,  ratably  to  and  among  the  holders  of  preferred 
participation  shares,  then  outstanding,  until  (including  any  pre- 
vious payments)  the  sum  of  $100  shall  have  been  paid  with 
respect  to  each  of  the  said  shares,  together  with  accrued  and 
unpaid  semiannual  cumulative  dividends  of  $2.25  per  share  and 
the  proportionate  amount  then  accrued  of  such  dividends  then 
currently  accruing ;  and  third,  ratably  to  and  among  the  holders 
of  the  common  participation  shares. 

Section  12.  W^ith  the  written  consent  or  approval  of  a  ma- 
jority of  the  members  of  the  Committee,  and  on  such  terms 
and  conditions  as  the  Committee  shall  approve,  the  Trustees 
shall  have  power  to  mortgage  or  to  pledge  all  or  any  part  of 
the  trust  fund  for  the  purpose  of  borrowing  money  (repayable 
from  the  trust  fund  and  not  otherwise)  to  pay  the  principal  and 
interest  of  any  of  said  five  per  cent  bonds  at  their  maturity 
by  lapse  of  time  or  otherwise;  provided,  however,  that  no 
money  shall  be  borrowed  otherwise  than  in  conformity  with  the 
conditions  and  limitations  expressed  in  subdivision  (k)  of 
section  16  of  this  article. 

Section  13.  With  the  direction  or  approval  of  the  Com- 
mittee   (and  the  indenture  securing  the  five  per  cent  bonds 


656 


Trusts  for  Business  Purposes. 


shall  so  provide),  the  Trustees,  may  withdraw  any  of  the  trust 
fund  securities  from  the  Hen  of  the  indenture  securing  the 
said  bonds,  by  paying  to  the  trustees  under  such  indenture 
in  cash,  for  each  share  of  the  capital  stock  of  the  Chicago 
City  Railway  Company,  the  sum  of  $200  per  share,  and  for 
each  of  the  other  trust  fund  securities  so  withdrawn,  the  par 
value  thereof,  and  for  the  purpose  of  withdrawing  any  of  such 
securities,  the  Trustees  may  use  any  funds  in  their  hands ; 
but  the  Trustees  shall  not  in  this  manner  withdraw  any  one 
class  or  kind  of  such  securities  to  an  amount  exceeding  ten 
per  cent  of  such  class  or  kind  of  securities  subject  to  this  trust 
agreement,  except  that  as  herein  provided,  bonds  may  be  con- 
verted into  stock  and  canceled.  The  Trustees,  as  directed  or 
authorized  by  the  Committee,  shall  hold  or  shall  sell  and  dis- 
pose of  such  securities,  so  withdrawn. 

At  any  time  after  so  withdrawing  any  of  such  trust  fund 
securities,  the  Trustees  may  reassign  and  deliver  the  same 
to  the  trustee  under  the  said  collateral  trust  indenture  securing 
the  five  per  cent  bonds,  and  thereupon  they  shall  be  entitled 
to  demand  and  to  receive  the  money  paid  to  the  said  trustee  at 
the  time  of  the  withdrawal  of  such  securities  so  reassigned 
and  delivered. 

Section  14.  In  the  event  that  the  Trustees  shall  not  deliver 
to  the  trustee  under  the  indenture  securing  the  five  per  cent 
bonds,  the  full  amount  of  the  securities  in  the  assigning  clause 
of  this  trust  agreement  scheduled  as  being  transferred  to  the 
Trustees,  the  Trustees  shall  have  the  right  to  deposit  with 
the  said  trustee,  in  lieu  of  any  such  securities,  and  to  cover 
any  such  shortage,  cash  for  each  share  of  the  capital  stock 
of  the  Chicago  City  Railway  Company  at  the  rate  of  $200  a 
share  and  for  any  of  the  other  securities  the  par  value  thereof; 
which  cash  from  time  to  time  thereafter  may  be  withdrawn 


Appendix.-  657 

by  them  in  corresponding  amounts  upon  delivering  to  the 
trustee  under  such  indenture  the  securities  in  heu  of  which 
such  cash  deposit  shall  have  been  made. 

Section  15.  With  the  consent  or  approval  of  the  Com- 
mittee, and  of  the  holders  of  a  majority  of  all  the  participa- 
tion shares,  including  a  majority  of  the  preferred  participa- 
tion shares,  the  Trustees  shall  have  power  to  sell,  or  to 
exchange  for  shares  of  stock  or  other  securities  or  for  part 
cash  and  part  securities  and  other  property,  any  of  the  trust 
fund  securities;  subject,  however,  to  the  lien  of  the  indenture 
securing  the  five  per  cent  bonds,  or  any  other  bonds  issued 
for  the  purpose  of  paying  off  said  bonds.  Said  sale,  ex- 
change, or  other  disposition  of  said  securities,  or  of  any  part 
thereof,  however,  shall  be  subject  to  the  lien  of  said  indenture, 
and  otherwise  may  be  upon  such  terms  and  conditions  as 
shall  be  approved  by  the  Committee  and  the  holders  of  the 
specified  proportion  of  the  participation  shares,  respectively. 

Section  16.  Subject  to  any  rights  of  the  trustee  of  the  said 
collateral  trust  indenture  dated  January  3,  1910,  as  specified 
therein,  and  subject  to  the  terms  of  the  written  approval  or 
consent  of  the  Committee  in  any  case  where  under  the  terms 
of  this  trust  agreement  such  approval  or  consent  is  authorized 
or  required,  the  Trustees  shall  have  power: 

(a)  To  deposit  any  moneys  derived  from  the  trust  fund, 
with  any  trust  company,  or  in  any  bank  ; 

(b)  To  loan  any  moneys  under  control  of  the  Trustees 
available  for  such  purpose,  on  such  terms,  and  with  or  with- 
out security,  and  to  such  persons  or  companies  as  the  Com- 
mittee shall  approve; 

(c)  To  buy,  or  to  join  with  any  person  or  persons  in  buy- 
ing, any  property  that  shall  be  sold  under  the  provisons  of 
any   mortgage   or    security    in    which   property    or    any   part 


658  Trusts  for  Business  Purposes. 

thereof  the  Trustees  shall  have  an  interest,  because  of  some 
right  under  this  trust  agreement,  and  to  allow  the  title  to  any 
property  so  bought  to  be  taken  in  the  name  or  names  of  such 
person  or  persons,  and  to  be  held  by  such  person  or  persons 
as  the  Committee  shall  approve; 

(d)  To  transfer  to  any  person  or  persons  any  share  or 
shares,  in  any  company  or  association,  the  securities  of  which 
or  any  part  thereof,  shall  constitute  part  of  the  trust  fund, 
as  hereinbefore  provided,  and  to  allow  any  such  share  or 
shares  to  stand  in  the  name  or  names  of  such  person  or  per- 
sons, as  the  Committee  shall  approve,  in  order  to  qualify 
such  person  or  persons  as  a  director  or  directors,  or  as  an 
officer  or  officers  of  such  company,  or  otherwise,  or  for  the 
purpose  of  maintaining  the  organization  of  such  company; 

(e)  To  collect  and  to  sue  for,  and  to  receive  and  to  receipt 
for,  all  sums  of  money  due  the  Trustees;  to  compound,  com- 
promise, and  to  abandon  or  to  adjust  by  arbitration,  or  other- 
wise, any  actions,  suits,  proceedings,  disputes,  claims,  demands 
and  things  relating  to  said  trust  fund;  and  to  transfer  to  and 
deposit  with  any  trust  company  or  other  persons,  any  shares 
or  securities  forming  part  of  the  trust  fund,  for  the  purpose 
of  any  arrangement  for  enforcing  or  protecting  the  rights 
and  interests  of  the  trustees  or  of  the  holders  of  the  bonds 
or  participation  shares  hereinbefore  provided  for ;  and  to  give 
time,  with  or  without  security,  for  the  payment  or  delivery 
of  any  debts  or  property  claimed  by  the  Trustees,  or  belong- 
ing to  said  trust  fund;  and  to  pay  or  satisfy  any  claims 
against  the  trustees  or  the  said  trust  property ; 

(f)  To  invest  at  any  time,  and  from  time  to  time,  any 
sum  or  sums  which  the  Trustees  may  hold,  available  for 
investment,  in  any  securities  or  property  which  the  Com- 
mittee may  approve  and  with  like  approval  to  sell  or  other- 


Appendix.  659 

wise  to  dispose  of  any  such  investments  and  reinvest  the  pro- 
ceeds thereof,  or  any  part  thereof  and  so  to  continue  to 
invest  and  to  reinvest  during  the  period  of  this  trust ; 

(g)  To  permit  to  be  sold  or  leased  to,  or  merged  or  con- 
solidated with  each  other,  any  corporations  or  companies  any 
of  whose  shares,  bonds  or  securities  constitute  part  of  the 
trust  fund; 

(h)  To  vote  in  person  or  by  proxy  upon  all  shares  or 
other  securities  whatsoever,  belonging  to  this  trust ; 

(i)  To  vote  upon  any  of  the  shares,  constituting  any  part 
of  the  deposited  securities,  in  favor  of  any  lawful  consolida- 
tion, merger,  or  reorganization  or  the  properties,  franchises 
or  shares  of  any  of  the  companies  whose  shares  or  part  thereof 
shall  constitute  part  of  said  trust  fund,  with  the  properties, 
franchises  and  shares  of  any  other  company,  upon  such  terms 
and  conditions  as  shall  be  approved  by  both  the  Committee 
and  the  trustee  under  the  indenture  securing  the  five  per  cent 
bonds  or  of  any  bonds  issued  to  pay  ofif  said  bonds;  and  with 
like  approval  and  authority,  as  to  terms  and  conditions,  to 
vote  any  of  said  shares  to  authorize  a  lease  or  operating  agree- 
ment between  the  companies  or  any  of  them,  whose  shares 
or  part  thereof  shall  constitute  any  part  of  the  trust  fund, 
and  any  other  company  with  which  such  lease  or  operating 
agreement  may  lawfully  be  made; 

(j)  To  pay  any  and  all  taxes  or  liens  of  whatsoever  nature 
or  kind,  imposed  upon  or  against  the  said  trust  fund,  or  any 
part  thereof,  out  of  any  proper  funds  available  for  such  pur- 
pose ;  and 

(k)  To  borrow  money,  when  and  in  such  amount  or 
amounts  and  upon  such  terms  and  for  such  purposes  as  the 
Committee  may  approve,  and  as  such  Trustees,  to  execute 
and  to  deliver,  but  subject  to  the  provisions   of  sections   9 


66o  Trusts  for  Business  Purposes. 

and  10  of  Article  Five,  such  notes,  bonds  or  other  evidences 
of  indebtedness,  payable  only  out  of  the  trust  fund,  in  stich 
form  and  containing  such  terms  and  conditions,  as  the  Com- 
mittee may  approve;  and  as  security  therefor,  on  such  terms 
and  conditions  as  the  Committee  may  approve,  to  mortgage 
or  pledge,  any  property  or  securities  held  by  said  Trustees 
under  this  trust  agreement. 

Every  obligation  made  or  issued  by  the  Trustees  shall  pro- 
vide expressly  in  substance  or  effect  as  follows : 

"This  obligation  is  issued  by  the  undersigned  not  individu- 
ally, but  as  Trustees,  under  a  certain  Trust  Agreement,  dated 
January  i,  1910,  hereby  made  part  hereof,  and  is  payable  only 
from  the  trust  fund  therein  mentioned,  any  and  all  personal 
hability  of  the  Trustees,  Committee,  bondholders  and  cer- 
tificate holders  thereunder  being  and  having  been  expressly 
waived  by  the  holder  hereof." 

The  five  per  cent  bonds  and  the  appurtenant  coupons,  sub- 
stantially in  the  form  recited  in  the  said  collateral  trust  in- 
denture dated  January  3,  1910,  are  hereby  expressly  author- 
ized. 

(1)  To  enter  into  such  contracts  of  guaranty  as  shall  be 
approved  by  the  Committee,  the  obligations  arising  thereun- 
der to  be  payable  only  out  of  the  trust  fund  held  by  the 
Trustees.  Said  contracts  shall  be  restricted,  however,  to  the 
guaranty  of  dividends,  rentals,  bonds  and  other  obligations, 
payable  by  companies,  the  stock  of  which,  or  not  less  than  a 
majority  of  the  stock  of  which,  shall  be  owned  by  the  Trus- 
tees, and  to  the  guaranty  of  obligations  secured  by  stock  or 
bonds  of  companies  whose  stock,  or  not  less  than  a  majority 
of  whose  stock,  shall  be  owned  by  the  Trustees.  Every  such 
contract  or  obligation  shall  provide  expressly  or  in  substance 
as   follows : 


Appendix.  66i 

"This  obligation  is  issued  by  the  undersigned,  not  individu- 
ally, but  as  Trustees  under  a  certain  Trust  Agreement  dated 
January  i,  1910,  as  amended  on  the  7th  day  of  November, 
1910,  hereby  made  part  hereof,  and  is  payable  only  from  and 
out  of  the  trust  fund  therein  mentioned,  but  subject  to  the 
prior  rights  of  the  First  Trust  and  Savings  Bank,  of  Chicago, 
Illinois,  as  trustees  under  the  indenture  dated  January  3, 
1910,  and  of  the  present  and  future  holders  of  the  bonds 
issued  thereunder,  any  and  all  personal  liability  hereunder 
of  the  Trustees,  Committee,  bondholders  and  certificate  hold- 
ers under  said  Trust  Agreement  or  indenture  being  and  hav- 
ing been  expressly  waived  by  the  holders  hereof.  A  copy 
of  said  Trust  Agreement  and  said  indenture  is  on  file  with 
the  First  Trust  and  Savings  Bank  of  Chicago." 

No  debt,  obligation  or  liability  of  any  kind  shall  be  created, 
or  incurred  by  any  one  other  than  the  Trustees  or  otherwise 
than  in  the  manner  in  this  trust  agreement  provided. 

No  member  of  the  Committee  and  no  certificate  holder 
shall  be  authorized  to  impose  any  debt  or  obligation  or  lia- 
bility of  any  kind  upon  the  trust  fund,  or  upon  the  Trustees 
or  any  of  them,  or  upon  the  Committee  or  any  member  thereof, 
or  upon  any  certificate  holder  or  holders,  or  upon  the  holder 
or  holders  of  any  bond  or  obligation  made  or  incurred  by  the 
Trustees. 

Anything  in  this  trust  agreement  to  the  contrary  notwith- 
standing, no  distribution  of  the  principal  of  the  trust  fund, 
or  of  any  part  thereof,  or  of  the  proceeds  thereof,  shall  be 
made  to  or  among  the  certificate  holders  or  any  of  them, 
until  any  and  all  outstanding  debts,  obligations  or  liabilities 
of  the  Trustees,  payable  out  of  the  trust  fund  or  any  part 
thereof,  shall  have  been  paid  or  discharged  or  satisfied,  or 
provision  satisfactory  to  the  Trustees  shall  have  been  made 


662 


Trusts  for  Business  Purposes. 


for  the  payment  or  discharge  or  satisfaction  thereof. 

Each  and  every  obHgation  and  each  and  every  certificate 
of  participation  shares  issued  by  the  Trustees  under  this  trust 
agreement  after  the  7th  day  of  November,  1910,  shall  after 
the  names  of  the  Trustees  at  the  foot  thereof,  contain  the 
following  recital : 

"As  Trustees  under  the  trust  agreement  dated  January  i, 
1910,  creating  the  Chicago  City  and  Connecting  Railways 
Collateral  Trust  (as  amended  November  7,  1910),  and  not 
individually." 

Provided,  however,  that  any  and  all  of  the  five  per  cent 
bonds  of  the  Trustees  issued  or  issuable  under  the  Indenture 
dated  January  3,  19 10,  shall  be  executed  by  the  Trustees  in 
the  form  recited  in  said  indenture.  (This  paragraph  (i)  of 
section  16  of  Article  Four  hereof  added  bv  amendment  made 
November  7,  1910). 

(m)  To  enter  into  such  contract  or  contracts,  as  shall 
be  approved  by  the  Committee,  for  purchasing  or  acquiring, 
or  procuring  the  right  to  purchase  or  acquire,  securities,  or 
any  part  thereof,  issued  or  to  be  issued  in  accordance  with  any 
present  or  future  plan  providing  for  thfe  merger  or  consolida- 
tion of  the  elevated  railroads  of  the  city  of  Chicago,  and 
contemplating  a  merger  or  consolidation  of  such  consolidated 
elevated  railroads  with  the  surface  street  railways  of  the  city 
of  Chicago,  the  obligations  arising  thereunder  to  be  payable 
only  out  of  the  trust  fund  held  by  the  trustees.  Every  such 
contract  shall  provide  expressly  or  in  substance,  as  follows : 

"This  obligation  is  issued  by  the  undersigned,  not  individu- 
ally, but  as  Trustees  under  a  certain  Trust  Agreement,  dated 
January  i,  1910,  as  amended  November  7,  1910,  and  as 
amended  June  12,  191 1,  hereby  made  part  hereof,  and  is  pay- 
able only  from  and  out  of  the  trust  fund  therein  mentioned, 


Appendix.  663 

but  subject  to  the  prior  rights  of  the  First  Trust  and  Savings 
Bank  of  Chicago,  IlHnois,  as  trustee  under  the  indenture 
dated  January  3,  19 10,  and  of  the  present  and  future  holders 
of  bonds  issued  thereunder,  any  and  all  personal  liability 
hereunder  of  the  Trustees,  Committee,  Bondholders  and  Cer- 
tificate Holders  under  said  Trust  Agreement  or  indenture 
being  and  having  been  expressly  waived  by  the  holder  hereof. 
A  copy  of  said  Trust  Agreement  and  said  indenture  is  on  file 
with  the  First  Trust  and  Savings  Bank  of  Chicago." 

Each  and  every  obligation  and  each  and  every  certificate 
of  participation  shares  issued  by  the  Trustees  under  this 
Trust  Agreement  after  the  12th  day  of  June,  191 1,  shall,  after 
the  names  of  the  Trustees  at  the  foot  thereof,  contain  the  fol- 
lowing recital: 

"As  Trustees  under  the  Trust  Agreement  dated  January  i, 
1910,  creating  the  Chicago  City  and  Connecting  Railways  Col- 
lateral Trust  (as  amended  November  7,  1910,  and  as  amended 
June  12,  1911),  and  not  individually." 

Provided,  however,  that  any  and  all  of  the  five  per  cent 
bonds  of  the  Trustees  issued  or  issuable  under  the  indenture 
dated  January  3,  1910,  shall  be  executed  by  the  Trustees 
in  the  form  recited  in  said  indenture.  (This  paragraph  (m) 
of  section  16  of  Article  Four  hereof  added  by  amendment 
made  June  12,   191 1.) 

Sec.  17.  Subject  to  the  provisions  of  the  collateral  trust 
indenture,  and  as  far  as  lawful  at  any  time  and  from  time  to 
time,  with  the  written  consent  of  the  Committee,  the  Trustees 
may,  and  upon  the  written  request  of  the  Committee,  they 
shall  convert  or  cause  to  be  converted  into  shares  of  the  capi- 
tal stock  of  the  corporations  issuing  the  same,  all  of  the 
bonds  of  any  of  the  several  issues  of  bonds  transferable  in 
paragraph  II  of  the  assigning  clause  of  the  trust  agreement. 


664 


Trusts  for  Busini^ss  Purposes. 


Such  bonds  severally  and  respectively  shall  be  converted  into 
shares  of  capital  stock  as  herein  provided  only  (a)  if  the 
shares  issued  upon  such  conversion  shall  be  of  an  aggregate 
par  value  equal  to  the  aggregate  principal  sum  of  the  bonds 
converted;  (b)  if  all  of  the  bonds  of  each  such  issue  shall  be 
converted  as  an  entirety;  (c)  if  the  corporation  converting 
such  bonds  shall  have  no  other  outstanding  bonds  of  any 
issue  (or,  in  case  of  the  Calumet  &  South  Chicago  Railway 
Company,  no  outstanding  bonds  of  any  issue  other  than  bonds 
of  the  issue  underlying  the  consolidated  mortgage  bonds  of 
such  company  scheduled  in  said  paragraph  II  of  the  assigning 
clause  of  this  trust  agreement)  ;  (d)  if  all  of  the  stock  (ex- 
cepting directors'  qualifying  shares)  of  such  corporation  mak- 
ing such  conversion,  then  shall  be  held  by  the  trustees  under 
the  indenture  securing  the  five  per  cent  bonds;  and  (e)  if 
the  capital  stock  of  the  corporation  making  such  conversion, 
equal  at  par  to  the  aggregate  principal  sum  of  the  bonds  there- 
into converted,  shall  be  deposited  with  the  said  trustee,  sub- 
ject to  no  lien  prior  or  superior  to  the  lien  of  said  indenture 
securing  the  five  per  cent  bonds. 

In  every  case,  the  capital  stock  of  the  corporation  issued 
upon  any  such  conversion,  shall  be  issued  as  fully  paid  and 
non-assessable.  Such  capital  stock  may  be  either  common 
stock  or  preferred  stock,  or  part  common  stock  and  part  pre- 
ferred stock;  but  in  any  case,  all  of  the  capital  stock  (other 
than  directors'  qualifying  shares)  of  such  corporation,  whether 
theretofore  issued  or  then  issued,  shall  be  held  by  the  trustee 
under  said  indenture  securing  the  five  per  cent  bonds. 

Any  and  all  such  stock  issued  in  conversion  of  bonds  ipso 
facto  shall  become  and  shall  be  subject  to  this  trust  agree- 
ment and  to  all  the  terms  and  provisions  thereof,  and  forth- 
with, upon  the  issue  thereof,  shall  constitute  part  of  the  trust 


Appendix.  665 

fund,  and  shall  be  delivered  to  the  trustee  under  the  indenture 
securing  the  five  per  cent  bonds,  as  part  of  the  securities 
pledged  thereunder,  free  from  any  prior  lien. 

Article  Five. 

Section  i.  The  Trustees  shall  receive  out  of  the  trust  fund 
or  the  income  thereof,  for  their  services  such  remuneration 
as  from  time  to  time  shall  be  fixed  by  the  Committee,  and 
reimbursement  for  their  reasonable  expenses  and  disburse- 
ments, and  prior  indemnity  against  all  losses  and  liabilities  by 
them  incurred  in  the  discharge  of  their  duties  hereunder. 

Sec.  2.  Except  as  otherwise  herein  provided,  the  action  of 
a  majority  of  the  Trustees  taken  from  time  to  time  at  a  meet- 
ing, or  by  writing  with  or  without  a  meeting,  shall  constitute 
the  action  of  the  Trustees  and  have  the  same  effect  as  though 
assented  to  by  all.  When  any  Trustee,  being  a  natural  per- 
son, shall  be  absent  from  the  United  States,  and  shall  have 
been  so  absent  for  more  than  seven  (7)  days,  or,  in  the  judg- 
ment of  the  Committee  shall  be  unable  to  act  or  incapable 
of  acting  as  such  Trustee,  the  other  Trustees  or  Trustee,  for 
the  time  being,  may  exercise  all  the  powers  and  authority 
given  to  the  Trustees.  Any  Trustee  so  absent  or  contemplat- 
ing such  an  absence  may,  by  power  of  attorney  or  otherwise, 
empower  any  other  Trustee  or  Trustees  to  act  on  his  behalf, 
during  his  absence,  and  to  exercise  any  power,  discretionary 
or  otherwise,  and  to  use  his  name  in  the  execution  or  sign- 
ing of  documents  as  such  Trustee,  for  the  purposes  of  said 
trust. 

Sec.  3.  Any  trustee  may  retire  and  may  be  discharged 
from  these  trusts  by  presenting  his  resignation  in  writing  at 
a  meeting  of  the  Committee  or  of  certificate  holders,  or  by 


666 


Trusts  for  Business  Purposes. 


delivering  the  same  to  any  member  of  the  Committee,  but 
such  resignation  shall  be  effectual  and  complete  only  upon 
the  expiration  of  three  (3)  calendar  months  thereafter,  or 
upon  the  previous  acceptance  of  such  resignation  by  the  Com- 
mittee, or  the  appointment  of  a  new  Trustee  or  Trustees  in  his 
place,  and  meanwhile,  he  shall  continue  as  such  Trustee. 

Sec.  4.  At  any  time  and  from  time  to  time,  tlie  Commit- 
tee shall  have  power  to  increase  or  to  reduce  the  number  of 
Trustees  under  this  trust  agreement  (but  in  the  case  of  nat- 
ural persons,  not  to  a  number  of  less  than  two)  ;  and  without 
assigning  any  reason  therefor  to  remove  or  discharge  any 
Trustee  from  such  trust.  Whenever  any  Trustee  shall  die, 
or  shall  be  or  shall  desire  to  be,  discharged  from  said  trust, 
or  shall  resign,  the  Committee  shall  have  power  to  appoint 
in  his  place,  a  new  Trustee;  and  the  Committee  may  appoint 
any  incorporated  company  having  a  capital  and  surplus  of  not 
less  than  $1,000,000,  and  qualified  to  act  in  the  premises,  as 
the  sole  Trustee  under  this  trust  agreement ;  but  no  such 
incorporated  company  shall  be  a  Trustee  jointly  with  one  or 
more  natural  persons,  or  with  any  other  such  incorporated 
company. 

Sec.  5.  Upon  the  appointment  of  any  new  Trustee  or  Trus- 
tees, such  instruments  shall  be  executed  as  shall  be  necessary 
or  convenient  for  vesting  the  trust  fund  in  the  new  Trustee, 
or  for  providing  evidence  of  such  vesting. 

Sec.  6.  The  receipt  of  the  Trustees,  or  of  any  of  them, 
for  moneys  or  property  paid  or  delivered  to  them  or  him, 
shall  be  an  effectual  discharge  therefor  to  the  persons  paying 
or  delivering  the  same,  and  no  person  receiving  any  such  re- 
ceipt shall  be  bound  to  see  to  the  application  of  such  moneys 
or  property. 

Sec.  7.     The  Trustees  shall  cause  to  be  kept  in  books  pro- 


Appendix.  667 

vided  for  the  purpose,  minutes  of  all  resolutions  and  proceed- 
ings of  the  Trustees,  and  of  the  names  of  the  members  pres- 
ent at  each  meeting  of  the  Trustees  specifying  whether  they 
were  present  in  person  or  by  proxy.  Such  minutes  shall  be 
evidence  of  the  matters  therein  stated  and  shall  be  conclusive 
evidence  in  favor  of  all  persons  acting  thereon  in  good  faith 
of  all  matters  and  things  therein  stated. 

Sec.  8.  The  Trustees  shall  not  be  liable  for  errors  of  judg- 
ment, either  in  holding  property  originally  conveyed  to  them, 
or  in  acquiring  and  afterwards  holding  any  other  shares  of 
stock,  bonds,  notes,  securities  or  other  property,  nor  for  any 
loss  arising  out  of  any  investment,  nor  for  failure  to  sue  for 
or  to  collect  the  same,  nor  for  any  act  or  any  omission  to 
act  (not  in  disregard  or  violation  of  any  express  provision 
of  this  agreement)  performed  or  omitted  by  them,  in  the 
execution  of  these  trusts  in  good  faith,  and  each  Trustee  shall 
be  answerable  and  accountable  only  for  his  own  several  acts, 
receipts,  neglects  and  defaults,  severally  and  respectively,  and 
not  for  those  of  any  other  or  of  any  agent  properly  employed 
by  them,  or  of  any  bank,  trust  company,  broker  or  auctioneer, 
or  other  person,  with  whom  or  into  whose  hands  any  trust 
moneys  or  securities  may  be  deposited  or  come.  Neither  shall 
any  Trustee  be  liable  or  accountable  for  any  defect  in  title, 
invalidity  or  other  defect,  to,  of  or  in  the  shares  of  stocks, 
bonds,  notes,  obligations  or  other  properties  or  securities  ac- 
quired for  the  trust,  or  for  any  loss  unless  it  shall  happen 
through  his  own  several  wilful  default ;  and  severally  and 
respectively,  the  Trustees  shall  be  entitled  as  above  statec' 
in  section  6  of  Article  One  and  in  the  said  collateral  trust 
indenture  securing  the  five  per  cent  bonds,  to  prior  indemnity 
out  of  the  trust  fund  against  any  liability  by  them  incurred 
in  the  execution  of  the  trusts  hereof.     No  Trustee  of  these 


668 


Trusts  for  Business  Purposes. 


presents,  however,  appointed,  shall  be  obliged  to  give  any 
bond  or  surety  or  other  security  in  respect  of  the  trusts  hereof. 

Sec.  9.  Every  note,  bond,  contract,  instrument,  promise, 
undertaking,  and  every  other  act  or  thing  whatsoever,  exe- 
cuted or  performed  by  the  Trustees  or  any  of  them,  shall  be 
executed  or  performed  by  them  or  him  only  in  the  capacity 
as  Trustees  or  Trustee  under  this  indenture.  The  Trustees 
are  not  authorized  to  impose,  nor  shall  they,  at  any  time,  by 
any  act  or  thing  done  by  them,  impose  or  seek  to  impose  any 
personal  liability  or  obligation  upon  the  Committee  or  any 
member  thereof,  or  upon  any  holder  of  any  participation  share 
or  of  any  certificate  thereof  or  of  any  five  per  cent  bond  or 
of  any  other  security  issued  by  the  Trustees  under  this  trust 
agreement. 

Sec.  10.  No  recourse  ever  shall  be  had,  under  or  upon 
any  note,  bond,  promise,  contract,  instrument,  undertaking, 
obligation,  covenant  or  agreement  executed  or  performed  by 
the  Trustees  as  Trustees  under  this  indenture,  or  by  reason 
of  the  creation  of  any  indebtedness  by  the  Trustees,  as  Trus- 
tees under  this  indenture,  for  any  purpose  authorized  by  this 
indenture,  against  the  Trustees  individually  or  against  the 
holder  of  any  of  the  participation  shares  or  the  certificates 
thereof,  or  any  other  securities  issued  by  the  Trustees  here- 
under, or  against  any  member  of  the  Committee,  either  di- 
rectly or  indirectly  by  legal  or  equitable  proceeding,  or  by 
virtue  of  any  statute  or  otherwise;  it  being  expressly  under- 
stood and  agreed  that  this  indenture,  and  all  obligations 
created  hereunder  by  said  Trustees,  are  solely  the  obligations 
of  the  trust  estate,  and  that  all  such  obligations,  liabilities, 
covenants  and  agreements  of  said  Trustees,  as  Trustees  under 
this  trust  agreement,  shall  be  enforced  against,  and  be  satis- 
fied out  of,  the  trust  fund  only,  or  such  part  thereof  as  shall, 


Appendix.  669 

under  the  terms  and  provisions  of  this  indenture,  be  liable 
therefor ;  all  personal  liability  of  the  Trustees,  and  of  the 
holders  of  any  certificates  by  them  issued,  and  of  the  Com- 
mittee and  its  members  and  of  all  beneficiaries  under  this 
agreement,  being  hereby  expressly  waived. 

Sec.  II.  From  time  to  time,  the  Trustees  may  execute,  and 
may  file  with  the  trustee,  under  the  collateral  trust  indenture 
securing  the  five  per  cent  bonds  (or  with  the  trustee  under 
any  instrument  securing  any  bonds  issued  to  pay  off  such 
five  per  cent  bonds),  a  writing  appointing  any  person  or 
persons,  or  any  copartnership  or  corporation,  the  agent  or 
agents  of  the  Trustees,  in  the  name,  place  and  stead  of  the 
Trustees,  to  sign  any  bond  or  coupon  authorized  to  be  issued 
under  this  trust  agreement,  or  to  sign  any  order  or  authority 
to  deliver  any  such  bond  when  certified  pursuant  to  the  pro- 
visions of  the  instrument  whereunder  such  bond  is  issuable, 
or  to  sign  any  certificate  of  any  participation  share  or  share 
authorized  to  be  issued  under  this  trust  agreement,  or  to  sign 
and  endorse  any  checks  or  drafts  which  the  Trustees  them- 
selves might  sign. 

From  time  to  time,  the  Trustees  may  revoke  any  such  ap- 
pointment previously  made,  and  may  appoint  a  substitute  or 
substitutes  with  like  power  and  authority;  but  no  such  revo- 
cation shall  operate  to  annul,  or  in  anywise  to  afifect,  any  act 
or  proceeding  done  or  taken  by  any  agent  or  agents  previous 
to  such  revocation  of  authority  and  service  of  notice  in  writ- 
ing thereof  upon  the  trustee  under  said  collateral  trust  inden- 
ture or  other  instrument  aforesaid,  or  shall  operate  to  annul, 
or  in  anywise  to  afifect,  any  act  or  proceeding  done  or  taken 
pursuant  to  the  order  of  any  agent  or  agents  theretofore  ap- 
pointed as  provided  in  this  section,  of  the  revocation  of  whose 


670 


Trusts  for  Business  Purposes. 


authority  notice  in  writing  shall  not  have  been  given  as  above 
stated. 

Until  otherwise  ordered  by  the  Trustees,  any  bond  or  coupon 
or  any  certificate  of  any  participation  share  may  be  signed  in 
behalf  of  the  Trustees  by  Sam  R.  Jenkins,  of  the  city  of 
Qiicago,  state  of  Illinois,  hereby  appointed  the  agent  of  the 
Trustees  for  that  purpose;  and,  until  otherwise  ordered  by 
the  Trustees,  without  any  further  act  or  appointment  here- 
under, may  exercise  such  powers  of  such  Agent. 

The  death  of  the  Trustees,  or  any  of  them,  or  of  any  suc- 
cessor to  them,  shall  not  operate  to  revoke  any  agency  created 
pursuant  to  the  provisions  of  this  section. 


Article  Six. 

Section  i.  Xo  holder  of  any  bond,  participation  share  or 
certificate,  or  of  any  security  or  obligation  issued  under  and 
in  accordance  with  the  provisions  of  this  indenture,  shall  be 
entitled  to  terminate  this  trust,  or  any  trust  organized  and 
maintained  under  tliis  indenture,  or  to  require  any  distribu- 
tion or  disposition  of  any  of  the  securities  held  in  trust  here- 
under, other  than  in  accordance  with  the  terms  and  provisions 
of  this  indenture. 

Sec.  2.  The  death  of  any  Trustee,  or  of  any  holder  of  any 
of  said  participation  shares  or  certificates,  or  of  any  other 
securities  issued  by  the  Trustees,  or  of  any  member  of  the 
Committee,  at  any  time  during  the  continuance  of  this  trust, 
shall  not  in  any  way  operate  to  terminate  this  trust,  and  shall 
not  entitle  the  legal  representatives  of  such  deceased  Trustee, 
or  of  such  deceased  member  of  said  Committee,  or  of  such 
deceased  holder  of  any  of  said  participation  shares  or  cer- 
tificates or  other  securities,  to  terminate  this  trust,  or  to  require 


Appendix.  671 

any  accounting  or  sale  or  distribution  of  any  of  the  securities 
or  property  held  hereunder. 

Article  Seven. 

Section  i.  James  B.  Forgan,  John  J.  Mitchell  E.  K.  Boisot, 
Harrison  B.  Riley,  John  A.  Spoor,  Edward  Morris,  Samuel 
Insull  and  Ira  M.  Cobe  hereby  are  appointed  to  act  as  the 
original  members  of  the  Committee  vested  with  the  powers 
and  discretions  in  this  indenture  specified. 

Sec.  2.  The  Committee,  as  from  time  to  time  constituted 
shall  consist  of  not  less  than  five  (5)  nor  more  than  nine  (9) 
members.  It  shall  not  be  necessary  that  any  member  of  the 
Committee  shall  be  a  holder  of  any  of  the  participation  certifi- 
cates or  securities  issued  hereunder.  The  certificate  holders 
from  time  to  tim.e  may  increase  or  may  reduce  the  number  of 
the  Committee  within  the  limits  above  mentioned. 

Sec.  3.  The  Committee  shall  be  elected  at  the  first  and  at 
every  subsequent  annual  meeting,  or  if  not  so  elected  at  an 
annual  meeting,  they  may  be  elected  at  any  special  meeting 
which  shall  be  held  prior  to  the  next  following  annual  meeting 
of  the  certificate  holders,  and  shall  continue  in  office  until  the 
next  annual  meeting,  and  until  their  successors  shall  have  been 
chosen  and  shall  have  taken  their  places  upon  the  Committee. 
Any  member  of  the  Committee  shall  be  ehgible  for  re-election. 

Sec.  4.  Any  vacancy  in  the  membership  of  the  Committee, 
may  be  filled  by  the  remaining  members  of  the  Committee;  but 
any  member  so  appointed  shall  continue  in  office  only  so  long 
as  the  member  in  whose  place  he  is  appointed  v.'ould  have  con- 
tinued in  office,  and  the  remaining  members  of  the  Committee 
may  act  notwithstanding  any  vacancy  in  their  number. 

Sec.  5.     Any  member  of  the  Committee  may  resign  by  pre- 


6/2  Trusts  for  Business  Purposes. 

senting  his  resignation  in  writing  at  a  meeting  of  the  Com- 
mittee. 

Sec.  6.  The  remuneration  of  the  Committee  shall  be  fixed 
from  time  to  time  by  the  certificate  holders  then  entitled  to  vote, 
at  any  meeting  thereof,  and  the  amount  thereof  shall  be  divided 
among  the  members  of  the  Committee  in  such  manner  as  shall 
be  determined  by  agreement  among  the  members  of  the  Com- 
mittee, and  in  the  absence  of  such  agreement  shall  be  divided 
among  them  equally.  Until  the  remuneration  is  so  fixed,  each 
member  of  the  Committee  shall  receive  ten  dollars  for  every 
meeting  of  the  Committee  that  he  shall  attend,  and  except  as 
herein  provided  no  further  remuneration. 

Sec.  7.  If  a  member  of  the  Committee  shall  be  called  upon 
to  travel  or  to  perform  other  extra  services,  the  Committee 
may  determine  his  special  remuneration,  and  shall  provide  for 
payment  of  such  remuneration  and  his  expenses  in  respect  of 
such  services. 

Sec.  8.  The  Committee  may  act  by  a  writing  as  hereinafter 
provided  in  section  17  of  this  article,  or  they  may  meet  together 
for  the  transaction  of  business,  and  from  time  to  time  they 
may  adopt  such  rules  and  regulations,  and  may  alter  or  amend 
the  same,  as  they  shall  deem  advisable  for  the  regulation  and 
transaction  of  their  business.  They  may  prescribe  the  times 
and  places  of  regular  meetings  of  the  Committee,  which  may 
be  held  without  any  further  notice  thereof ;  but  except  in  pur- 
suance of  a  special  resolution  passed  at  a  previous  meeting  of 
the  Committee  or  by  agreement  of  all  the  members  of  the  Com- 
mittee no  meeting  shall  be  held  at  any  place  other  than  the 
city  of  Chicago. 

Sec.  9.  The  quorum  necessary  for  the  transaction  of  busi- 
ness at  a  meeting  of  the  Committee,  shall  be  a  majority  of  the 
then  existing  members  of  the  Committee,  present  personally  or 


Appendix.  673 

by  proxy,  of  which  members  at  least  two  shall  be  present  in 
person.  Such  quorum  shall  have  full  power  to  exercise  all  or 
any  of  the  powers,  authorities  and  discretions  for  the  time  be- 
ing vested  in  the  Committee. 

Sec.  10.  The  Chairman,  or  a  majority  of  the  existing  Com- 
mittee, at  any  time  may  call  a  special  meeting  of  the  Committee 
by  giving  one  day's  notice  of  such  meeting.  In  computing  such 
time  Sundays  and  legal  holidays  shall  be  excluded.  A  notice 
thereof  sent  through  the  post-office,  postage  prepaid,  in  a  sealed 
wrapper,  addressed  to  any  member  of  the  Committee  at  his  last 
known  post-ofifice  address,  and  posted  in  the  city  of  Chicago, 
shall  be  deemed  sufficient  notice  to  such  member,  whether  the 
same  shall  be  received  by  him  or  not.  If  any  member  of  the 
Committee  shall  be  out  of  the  United  States  it  shall  not  be 
necessary  to  give  him  any  notice  of  such  meeting.  The  mem- 
bers of  the  Committee  may  in  writing  or  by  attendance  waive 
the  notice  required  for  a  special  meeting. 

Sec.  II.  Any  member  of  the  Committee  from  time  to  time 
in  writing  may  appoint  another  member  as  his  proxy  to  vote  at 
any  meeting  of  the  Committee,  or  to  perform  any  other  act  or 
duty  as  a  mernber  of  the  Committee  hereunder. 

Sec.  12.  Questions  arising  at  any  meeting  of  the  Committee 
shall  be  decided  by  a  majority  of  the  votes  of  the  members  of 
the  Committee  present  personally  or  by  proxy,  and  in  case  of 
an  equality  of  votes  the  chairman  of  the  meeting  shall  have  an 
additional  and  deciding  vote.  Any  resolution  so  adopted  shall 
be  the  resolution  of  the  Committee. 

Sec.  13.  The  members  of  the  Committee  from  time  to  time 
shall  elect  from  their  number  a  chairman,  and  they  may  elect 
also  such  other  officers  as  the  Committee  shall  deem  advisable, 
which  officers  may  or  may  not  be  elected  from  among  the  Com- 
mittee.   All  of  such  officers  unless  removed  as  herein  provided, 


6/4 


Trusts  for  Busine;ss  Purposes. 


shall  continue  in  office  until  the  close  of  the  next  annual  meet- 
ing of  the  certificate  holders  and  until  their  successors  shall  have 
accepted  their  places.  The  Committee  from  time  to  time  shall 
prescribe  the  respective  powers  and  duties  of  such  officers  and 
shall  fix  the  compensation,  if  any,  of  every  officer  and  agent 
whom  they  shall  have  elected  or  appointed. 

Sec.  14.  The  Committee  at  any  time  may  permit  any  officer 
to  resign  his  office,  or  by  a  resolution  of  the  Committee  may 
remove  him  from  his  office  without  assigning  any  reason  there- 
for and  may  elect  another  person  in  his  place,  and  likewise  shall 
have  authority  to  elect  temporary  officers  to  ser\^e  during  the 
absence  or  disability  of  regular  officers. 

Sec.  15.  The  action  of  the  Committee  in  respect  of  any 
matter  shall  be  evidenced  by  a  resolution  passed  by  them  at  a 
meeting  except  as  herein  otherwise  provided. 

Sec.  16.  A  certificate  signed  by  the  chairman  or  the  secre- 
tary of  any  meeting  of  the  Committee  at  which  any  resolution 
is  passed  certifying  that  the  signer  was  such  chairman  or  such 
secretary,  of  such  meeting,  shall  be  conclusive  evidence  in  favor 
of  the  Trustees,  and  all  other  persons,  acting  in  good  faith  in 
reliance  thereon,  of  the  contents  of  such  resolution  and  of  all 
matters  in  such  certificate  contained  relating  to  such  meeting 
and  the  regularity  thereof,  and  of  the  passage  of  such  resolu- 
tion; and  no  person  shall  be  obliged  to  make  inquiry  as  to  any 
of  the  said  matters,  or  as  to  the  election  or  appointment  of  any 
person  acting  as  a  member  of  the  Committee  at  such  meeting, 
or  be  afifected  by  actual  or  implied  notice  of  any  irregularity 
whatsoever  therein. 

Sec.  17.  A  resolution  in  writing  signed  by  not  less  than 
two-thirds  of  the  members  of  the  Committee,  in  person  or  by 
proxy  as  above  authorized,  shall  be  as  valid  for  all  purposes 
as  a  resolution  passed  at  a  meeting  of  the  Committee. 


Appendix.  675 

Sec.  18.  The  Committee  shall  cause  to  be  kept  in  books 
provided  for  the  purpose,  minutes  of  all  resolutions  and  pro- 
ceedings of  the  Committee,  and  of  the  names  of  the  members- 
present  at  each  meeting  of  the  Committee,  specifying  whether 
they  were  present  in  person  or  by  proxy,  and  minutes  of  all 
resolutions  and  proceedings  of  all  meetings  of  the  certificate 
holders.  Such  minutes,  if  purporting  to  be  signed  by  the  chair- 
man or  secretary  of  such  meeting  or  of  the  next  succeeding 
meeting,  shall  be  evidence  of  the  matters  therein  stated  and  of 
the  regularity  of  the  meeting,  and  that  proper  notice  of  the 
meeting  was  given  if  any  was  required,  and  a  certificate  signed 
by  the  chairman  or  secretary  of  such  meeting  or  by  persons 
certifying  that  they  acted  as  such,  shall  be  conclusive  evidence 
in  favor  of  the  Trustees  and  all  persons  acting  thereon  in  good 
faith  of  all  matters  and  things  therein  stated. 

Sec.  19.  Subject  to  the  provisions  of  this  trust  agreement, 
and  the  provisions  of  the  collateral  trust  indenture  securing 
five  per  cent  bonds,  the  Committee  shall  manage  and  control  the 
trusts  created  hereunder;  ascertain  and  determine  "the  income 
of  the  trust  fund"  as  provided  in  the  collateral  trust  indenture 
securing  the  five  per  cent  bonds;  ascertain  and  determine  "the 
net  income  of  the  trust  fund"  as  provided  in  section  6  of 
Article  One  of  this  trust  agreement;  prepare  and  state  an  ac- 
count of  the  income  and  expenditures  of  this  trust  for  the 
annual  meeting  of  the  holders  of  participation  shares  as  pro- 
vided in  Article  Eight  of  this  trust  agreement ;  fix  and  deter- 
mine the  amount,  and  direct  the  use,  application  or  investment 
of  the  surplus  fund  of  the  trust  as  provided  in  Section  2  of 
Article  Four  of  this  trust  agreement ;  determine  the  use  and 
application  of  income  arising  as  mentioned  in  section  8  of 
Article  Four  hereof;  apportion  and  direct  the  payment  on  the 
participation  shares  as  dividends  thereon  of  any  moneys  or 


676  Trusts  for  Business  Purposes. 

property  applicable  to  such  purpose ;  pay  and  discharge  any  and 
all  expenses,  obligations  and  liabilities  incurred  by  or  in  behalf 
of  the  Trustees  or  the  Committee  in  the  administration  of  this 
trust ;  and  consider  and  pass  upon  all  questions  and  propositions 
where  the  consent,  authority  or  approval  of  the  Committee  is 
required ;  and  generally  they  shall  possess  and  may  exercise  all 
such  other  powers  as  reasonably  shall  be  required  for  the  proper 
administration  of  the  trusts  created  by  this  indenture :  but  the 
Committee  shall  not  have  power  in  disregard  of  any  express 
provision  of  this  trust  agreement  to  incur  liabilities  or  to  create 
or  to  issue  obligations. 

Sec.  20.  Any  of  the  Committee  may  purchase,  acquire  and 
own  any  of  the  five  per  cent,  bonds  or  any  of  the  participation 
shares,  free  from  accountability  with  respect  thereto  and  may 
deal  therein  in  all  respects  the  same  as  any  other  person  with 
any  holder  of  five  per  cent  bonds,  or  with  any  holders  of  any 
participation  certificate,  or  with  any  Trustee  or  with  any  other 
member  of  the  Committee  or  any  other  person. 

Sec.  21.  The  Committee  shall  not  be  liable  for  errors  of 
judgment  in  exercising  any  of  their  powers  or  discretions  under 
this  trust  agreement,  nor  for  any  loss  arising  out  of  any  invest- 
ment, nor  for  failure  to  sue  for  or  to  collect  any  moneys  or 
property  belonging  to  the  trust,  nor  for  any  act  or  any  omis- 
sion to  act,  performed  or  omitted  by  them,  in  the  execution  of 
their  powers  or  discretions  in  good  faith,  and  each  shall  1)e 
answerable  and  accountable  only  for  his  own  several  acts,  re- 
ceipts, neglects  and  defaults,  severally  and  respectively,  and  not 
for  those  of  any  other  or  any  agent  properly  employed  by  them, 
or  of  any  bank,  trust  company,  broker  or  auctioneer,  or  other 
person,  with  whom  or  into  whose  hands  any  trust  moneys  or 
securities  may  be  deposited  or  come;  nor  shall  any  member  of 
the  Committee  be  liable  or  accountable  for  any  defect  in  title. 


Appendix.  677 

invalidity  or  other  defect  to,  of  or  in  the  shares,  bonds,  notes, 
obligations  or  other  properties  or  securities  acquired  for  the 
trust,  nor  for  any  loss  unless  it  shall  happen  through  his  own 
several  wilful  default ;  and,  severally  and  respectively,  the  Com- 
mittee shall  be  entitled  as  stated  above  in  section  6  of  Article 
One,  and  in  the  said  collateral  trust  indenture  securing  the  five 
per  cent,  bonds,  to  reimbursement  for  their  reasonable  expenses 
and  disbursements,  and  to  prior  indemnity  out  of  the  trust  fund 
against  any  liability  by  them  incurred  in  the  execution  of  the 
trusts  hereof.  No  member  of  the  Committee,  however  ap- 
pointed, shall  be  obliged  to  give  any  bond  or  surety  or  other 
security  hereunder. 

Article  Eight. 

Sec.  I.  An  annual  meeting  of  the  certificate  holders  shall  be 
held,  at  twelve  o'clock  noon,  on  the  Tuesday  following  the  first 
Monday  in  February  (or  if  such  day  be  a  legal  holiday  then 
on  the  next  following  Tuesday,  not  a  holiday) ,  in  each  year,  at 
the  principal  office  of  the  Trustees  in  the  city  of  Chicago. 

At  each  annual  meeting,  the  Trustees  shall  lay  before  the 
certificate  holders  an  account,  as  prepared  and  stated  by  the 
Committee,  of  the  income  and  expenditures  of  their  trust  for 
the  financial  year  last  preceding  such  meeting,  and  also  may 
submit  to  the  certificate  holders  a  report  upon  any  other  matter. 
The  Committee  also  may  submit  to  the  certificate  holders,  any 
question,  resolution  or  proposition,  upon  which  the  Committee 
shall  desire  the  action  of  the  certificate  holders. 

Sec.  2.  At  each  annual  meeting,  the  certificate  holders  shall 
elect  the  persons  who  shall  act  as  the  Committee  for  the  ensuing 
year,  and  shall  talce  such  action  as  they  iruiy  consider  appro- 
priate in  reference  to  any  and  all  other  matters  brought  before 
the  meeting. 


678  Trusts  for  Busine;ss  Purposes. 

Sec.  3.  The  Committee  whenever  they  deem  it  advisable 
may,  and  upon  the  written  request  of  the  holders  of  certificates 
representing  not  less  than  twenty-five  per  cent.  (25%)  of  all 
of  the  participation  shares  at  the  time  outstanding,  and  then  en- 
titled to  vote,  shall  call  a  special  meeting  of  the  certificate  holders 
to  be  held  in  the  city  of  Chicago.  Every  such  request  of  cer- 
tificate holders  shall  express  the  purpose  of  the  meeting,  and 
shall  be  delivered  to  the  Committee,  or  to  one  of  its  members. 
In  case  for  a  period  exceeding  seven  (7)  days  after  such  re- 
quest shall  have  been  so  delivered,  the  Committee  refuse  or 
neglect  to  call  such  special  meeting  to  be  held  within  twenty-one 
(21)  days  after  the  delivery  of  such  request,  such  special  meet- 
ing may  be  called  by  the  certificate  holders  signing  such  request 
or  by  any  three  (3)  of  them. 

Sec.  4.  The  Chairman  of  the  Committee  shall  be  entitled  to 
preside  at  every  meeting  of  the  certificate  holders;  but  if  he  is 
not  present  at  the  commencement  of  the  meeting,  or,  being 
present,  shall  not  be  willing  to  preside,  the  certificate  holders 
present  shall  choose  any  certificate  holder  to  preside  as  chair- 
man of  such  meeting. 

Sec.  5.  At  a  special  meeting  of  the  certificate  holders  no 
business  shall  be  transacted  other  than  such  as  shall  have  been 
specified  in  the  notice  of  the  meeting. 

Sec.  6.  Written  or  printed  notices  of  the  annual  meeting 
and  of  special  meetings,  specifying  the  time  and  place  thereof, 
and  in  the  case  of  a  special  meeting  the  purposes  thereof,  shall 
be  given  by  the  secretary  of  the  Committee,  or  by  some  other 
person  designated  by  the  Committee,  to  each  of  the  certificate 
holders,  seven  (7)  days  at  least  before  such  meeting.  In  event 
of  the  Committee  refusing  or  failing  to  give  notice  of  any 
special  meeting  requested  to  be  called  by  the  certificate  holders 
in    the    manner   hereinbefore    provided,    then    the    written    or 


Appendix.  679 

printed  notice  of  such  meeting  may  be  sent  out  by  the  persons 
calling  the  same  as  provided  by  section  3,  of  this  Article  Eight. 
The  certificate  holders  may  waive  in  writing  the  notice  required 
for  any  meeting. 

Nevertheless,  a  failure  to  give  notice,  or  any  irregularity  in 
any  notice  of  the  annual  meeting  to  be  held  as  provided  in 
section  i  of  this  article,  or  in  the  mailing  thereof,  shall  not 
affect  the  validity  of  any  such  annual  meeting,  or  any  regular 
adjournment  thereof,  or  of  any  proceedings  thereat. 

Every  notice  to  the  certificate  holders  required  or  provided 
for  in  these  presents  may  be  given  to  them  personally,  or  by 
sending  it  to  them  through  the  post-office,  postage  prepaid,  in 
a  sealed  wrapper  addressed  to  each  of  them  respectively  at  his 
address  specified  in  the  transfer  books,  and  posted  in  the  city 
of  Chicago  or  in  the  city  of  New  York;  and  in  the  case  of  such 
mailing  shall  be  deemed  to  have  been  given  at  the  time  when 
it  is  so  posted.    In  respect  of  any  sliare  held  jointly  by  several 
persons,  notice  so  given  to  whichever  of  them  is  first  named  in 
the  transfer  books,  shall  be  sufficient  notice  to  all  of  them.    Any 
notice  so  sent  to  the  registered  address  of  any  certificate  holder 
shall  be  deemed  to  have  been  duly  sent  in  respect  of  every  share 
represented  by  such  certificate  whether  held  by  him  solely,  or 
or  jointly  with  others,  notwithstanding  he  be  then  deceased,  and 
whether  the  Trustees  or  the  Committee  or  any  person  sending 
such  notice  have  knowledge  or  not  of  his  death,  until  some  other 
person  or  persons  shall  be  registered  as  holders.    The  certificate 
of  the  person  or  persons  giving  such  notice  shall  be  sufficient 
evidence  thereof,  and  shall  protect  all  persons  acting  in  good 
faith  in  reliance  on  such  certificate. 

Sec.  7.  The  holders  of  certificates  representing  not  less  than 
one-fourth  of  all  of  the  shares  of  the  class  of  participation  cer- 
tificates, entitled  to  vote  at  any  meeting,  whether  represented 


68o 


Trusts  for  Business  Purposes. 


in  person  or  by  proxy,  slmll  constitute  a  quorum  for  the  transac- 
tion of  business. 

Sec.  8.  At  all  meetings  of  certificate  holders,  except  as  next 
hereinafter  provided,  every  such  holder,  in  person  or  by  proxy 
appointed  in  writing,  shall  be  entitled  to  cast  one  vote  for  each 
participation  share  registered  in  his  name  upon  any  question 
upon  which  such  share  shall  be  entitled  to  a  vote. 

For  the  purpose  specified  in  section  15  of  Article  Four,  or 
for  any  of  the  purposes  specified  in  section  14  of  this  Article 
Eight,  a  vote  may  be  cast  for  every  such  preferred  participation 
share  and  for  every  such  common  participation  share ;  but  upon 
all  other  questions  the  voting  right  in  respect  of  the  preferred 
participation  shares  and  of  the  common  participation  shares 
shall  be  mutually  exclusive,  that  is  to  say : 

So  long  as  every  semi-annual  instalment  of  the  cumulative 
dividends  of  $4.50  per  annum,  herein  provided  for,  shall  have 
been  paid  upon  every  preferred  participation  share  within 
ninety  days  after  the  time  fixed  for  any  such  payment,  the  hold- 
ers of  common  participation  shares  shall  have  the  right  to  vote 
in  respect  thereof,  and  such  right  sliall  be  exclusive,  and  the 
holders  of  preferred  participation  shares  shall  not  have  the  right 
to  vote  in  respect  thereof. 

In  case  of  any  failure  to  pay  any  such  semi-annual  instalment 
of  cumulative  dividends  upon  the  preferred  participation  shares 
within  the  period  of  ninety  days  after  the  same  shall  be  pay- 
able, then,  during  such  default  and  the  further  continuance 
thereof  the  holders  of  the  preferred  participation  shares  shall 
have  the  right  to  vote  in  respect  thereof  and  such  right  shall  be 
exclusive  and  during  such  continuing  default  the  holders  of 
the  common  participation  shares  shall  not  have  the  right  to 
vote  in  respect  of  any  such  common  participation  shares. 

As  soon  and  as  often  as  the  payment  of  any  such  instalment 


Appendix.  68i 

so  in  default  shall  have  been  made,  and  until  the  recurrence  of 
such  a  continuing  default,  such  right  of  the  holders  of  the  pre- 
ferred participation  shares  to  vote  in  respect  thereof  shall  cease, 
and  the  exclusive  right  of  the  holders  of  the  common  participa- 
tion shares  to  vote  in  respect  thereof,  shall  revive,  subject  to  the 
subsequent  loss  thereof  as  above  provided  upon  the  happening 
and  during  the  continuance  of  any  such  subsequent  default. 

Nothing  in  this  section  contained  either  shall  extend  or  shall 
limit  the  voting  right  of  the  common  participation  shares  for 
the  purpose  specified  in  section  15  of  this  Article  Eight. 

Sec.  9.  When  any  certificate  shall  be  held  jointly  by  several 
persons,  any  one  of  them  may  vote  at  any  meeting  in  person 
or  by  proxy  in  respect  of  such  certificate,  but  if  more  than  one 
of  them  shall  be  present  at  such  meeting  in  person  or  by  proxy 
no  vote  shall  be  received  in  respect  of  such  share  unless  the 
persons  so  present  shall  join  in  or  shall  assent  to  such  vote. 

Sec.  10.  If  the  holder  of  any  certificate  be  a  minor,  or  a 
person  of  unsound  mind,  or  subject  to  guardianship  or  to  the 
legal  control  of  any  other  person  as  regards  the  charge  or 
management  of  such  certificate,  he  may  vote  by  his  guardian, 
committee,  or  such  other  person  appointed  to  or  having  such 
control,  and  such  vote  may  be  given  in  person  or  by  proxy. 

Sec.  II.  For  the  purpose  of  ascertaining  and  defining  the 
certificate  holders  entitled  to  vote  at  any  meeting,  the  transfer 
books  may  be  closed  at  the  end  of  such  day  as  the  Committee 
shall  specify,  but  not  more  than  twenty-one  days  before  the  day 
of  such  meeting,  and  shall  remain  closed  until  the  close  of  the 
meeting,  and  no  person  shall  be  entitled  to  vote  at  such  meeting, 
whose  name  is  not  entered  upon  the  transfer  books  prior  to  such 
closing  thereof. 

Sec.  12.  If  at  the  time  appointed  for  a  meeting  a  quorum 
be  not  present,  the  meeting  shall  be  dissolved,  if  it  be  a  meeting 


682 


Trusts  for  Business  Purposes, 


called  at  the  request  of  certificate  holders  or  hy  certificate  hold- 
ers after  such  request  as  hereinbefore  provided ;  but  if  it  be  a 
meeting  otherwise  called  or  convened  in  accordance  with  any 
provision  of  this  trust  agreement,  the  certificate  holders  present 
in  person  or  by  proxy  shall  constitute  a  quorum  for  the  purpose 
of  adjourning  the  meeting  to  a  later  date,  but  shall  not  consti- 
tute a  quorum  for  the  transaction  of  any  other  business. 

Sec.  13.  Except  as  otherwise  herein  provided,  a  majority  of 
the  votes  given  at  any  meeting  shall  be  necessary  and  shall  be 
sufficient  to  constitute  the  action  of  such  meeting;  and  in  case 
of  an  equality  in  number  of  votes,  the  chairman  of  the  meeting 
shall  have  an  additional  and  deciding  vote. 

Any  action  taken  by  the  holders  of  certificates  representing  a 
majority,  in  amount,  of  all  of  the  participation  shares,  both  pre- 
ferred and  common,  including  a  majority  of  the  preferred  par- 
ticipation shares,  shall  bind  all  the  holders  of  participation 
shares  in  respect  of  all  such  shares  and  of  the  interest  in  the 
trust  fund,  provided  that  nothing  shall  affect  the  prior  lien  of 
any  bond,  or  the  prior  and  superior  rights  of  the  holders  of  pre- 
ferred participation  shares,  and  provided,  further,  that  no  vote 
given  or  action  taken  by  the  certificate  holders  shall  authorize 
or  shall  be  effectual  to  authorize  the  creation  of  any  liability  or 
the  issue  of  any  obligations  except  by  the  Trustees,  and  subject 
to  all  the  limitations  and  provisions  of  this  trust  agreement 
against  the  incurring  of  liabilities  payable  otherwise  than  out 
of  the  trust  fund  and  against  the  issuing  of  obligations  except 
as  above  prescribed  in  subdivision  (k)  of  section  16  of  Article 
Four  of  this  trust  agreement. 

Sec.  14.  By  a  resolution  passed  by  the  votes  of  the  holders 
of  the  certificates  representing  a  majority  of  the  total  number 
of  participation  shares  both  preferred  and  common,  including  a 
majority  of  the  preferred  participation  shares,  then  outstanding 


Appendix.  683 

such  certificate  holders  (i)  may  remove  any  Trustee  or  Trus- 
tees under  this  trust  agreement,  and  (2)  may  direct  the  Trus- 
tees to  sell  or  otherwise  to  dispose  of  the  securities  constituting 
the  trust  fund,  on  such  terms  as  will  produce  cash  sufficient  at 
least  to  pay  all  costs,  charges  and  expenses,  and  also  to  pay  the 
principal  and  the  interest  of  all  of  said  five  per  cent  bonds  then 
outstanding,  together  with  a  premium  of  five  per  cent,  of  such 
principal,  or  to  pay  the  principal  and  the  interest  of  any  bonds 
issued  to  pay  for  the  said  five  per  cent,  bonds,  and  any  premium 
that  may  be  required  upon  any  such  payment ;  and  in  the  event 
of  any  such  sale  or  disposition  of  the  trust  fund,  may  direct  the 
Trustees  to  terminate  the  trust,  and  to  distribute  the  proceeds 
in  accordance  with  the  provisions  of  this  trust  agreement. 

Sec.  15.  Unless  and  until  there  shall  be  a  subsisting  default 
in  the  payment  of  any  instalment  of  the  semi-annual  cumulative 
dividend  of  $2.25  per  share  upon  any  of  the  preferred  participa- 
tion shares,  the  holders  of  the  common  participation  shares,  by 
resolution  adopted  by  the  vote  of  two-thirds  of  the  number  of 
such  common  participation  shares  then  outstanding,  given  at  an 
annual  or  at  a  special  meeting  of  holders  of  participation  shares, 
may  alter  the  terms  and  provisions  of  this  trust  agreement ;  but 
no  alteration  shall  ])e  made  in  any  way  affecting  rights  of  the 
holders  of  the  said  five  per  cent,  bonds,  or  of  any  bonds  issued 
to  retire  the  same,  or  the  security  of  any  such  bonds,  or  in  any 
way  affecting  the  rights  and  priorities  of  the  preferred  partici- 
pation shares ;  nor  shall  any  alteration  ever  be  made,  which  shall 
authorize  the  Trustee  or  the  Committee  to  represent  or  bind  any 
certificate  holder  except  in  respect  of  his  beneficial  interest  in 
the  trust  fund,  or  whereby  any  personal  liability  or  obligation 
shall  be  imposed  upon  any  Trustee,  or  any  member  of  the  Com- 
mittee or  any  certificate  holder  under  this  indenture.  No  altera- 
tion shall  be  complete  or  effectual,  until  a  certificate  signed  by 


684  Trusts  for  Business  Purposes. 

the  chairman  and  secretary  of  the  meeting  at  which  the  resolu- 
tion is  passed  and  setting  out  such  resolution  and  the  manner 
in  which  it  was  passed,  shall  have  been  delivered  to  the  Trustees. 

Article  Nine. 

Section  i.  When  this  trust  agreement  shall  have  been  signed 
and  delivered  by  the  parties  of  the  first  part  and  by  any  two  of 
the  parties  of  the  second  part,  it  shall  become  effective  for  all 
purposes  with  the  same  force  as  though  on  the  day  of  the  date 
hereof  it  had  been  signed  and  delivered  by  all  of  the  parties 
hereto. 

Sec.  2.  In  the  construction  of  the  provisions  of  this  inden- 
ture, words  in  the  singular  number  include  the  plural  number, 
and  words  denoting  males  include  females,  and  words  denoting 
persons  include  firms  and  corporations,  and  the  words  corpora- 
tions and  companies  include  any  corporation,  association  or 
trust,  unless  a  contrary  intention  is  to  be  inferred  from  the 
subject-matter  or  context. 

This  trust  agreement  has  been  executed  in  four  counter  parts, 
each  of  which  shall  be  and  shall  be  taken  to  be  an  original  and 
all  collectively  but  one  instrument. 


Appendix,  685 

THE  CO-OPERATORS  OF  AMERICA. 
A  COMMON  LAW  TRUST. 

Reported  in  In  Re  Parker  et  al.,  275  Fed.  868. 

Articles  oe  Trust  made  this  17th  day  of  February,  A.  D. 
192 1,  by  and  between  W.  S.  Ceark,  GustavE  Kopp  and  Louis 
I.  Block,  of  Chicago,  Illinois,  settlors,  as  successors  in  trust 
to  George  A.  Abbott,  Carl  Wisner  and  Viggo  E.  Bird,  Trus- 
tees, who  have  resigned  their  trust,  hereinafter  called  Party 
of  the  First  Part,  and  Harrison  M.  Parker,  and  John  Coe  of 
Chicago,  Illinois,  and  Viggo  E.  Bird  of  New  London,  Con- 
necticut, Grantees,  hereinafter  called  the  Party  of  the  Second 
Part,  WITNESSETH,  That 

1.  Whereas,  Harrison  M.  Parker,  John  Coe  and  N.  A. 
Hawkenson,  heretofore  have  been  acting  under  the  designa- 
tion of  the  Co-Operative  Society  oe  America,  under  and 
by  virtue  of  a  common  law  trust  which  was  evidenced  by  a 
certain  Indenture  and  Declaration  of  Trust,  bearing  date  the 
20th  day  of  February,  A.  D.  1919;  and  recorded  in  the 
Recorder's  office  of  Cook  County,  Illinois,  as  Document 
#6554582,  and  attached  hereto  and  marked  Exhibit  A.  and 

2.  Whereas,  the  party  of  the  second  part  so  acting  as 
a  common  law  trust,  in  and  by  said  Indenture  and  Declara- 
tion of  Trust  had  the  power  to  acquire,  hold  and  dispose  of 
property,  real  personal  and  mixed,  of  every  kind  whatsoever, 
and  to  prosecute  and  conduct  all  manner  of  mercantile,  finan- 
cial and  industrial  business  and  all  manner  of  dealing  and 
trading  in  the  said  property,  and  to  convert  the  same  into  cash 
and  distribute  the  same,  in  payment  of  the  beneficial  interests 
at  par,  all  of  which  by  said  Indenture  and  Declaration  of 
Trust,  Exhibit  A,  reference  being  had  hereto,  will  fully  and 
at  large  appear,  and 


686  Trusts  for  Business  Purposes. 

3.  Whereas,  the  party  of  the  second  part,  under  and  by 
virtue  of  said  Indenture  and  Declaration  of  Trust  acquired 
certain  real  estate  in  the  State  of  Michigan,  which  real  estate 
is  fully  described  in  Exhibit  B  hereto  annexed  and  made  a 
part  hereof,  and 

4.  Whereas,  under  said  Indenture  and  Declaration  of 
Trust  the  party  of  the  second  part  became  and  were  entitled 
to  certain  other  real  estate  located  in  the  State  of  Michigan 
and  which  real  estate  is  fully  described  in  Exhibit  C  hereto 
attached  and  made  a  part  hereof,  and 

5.  Whereas,  the  party  of  the  second  part,  under  and  by 
virtue  of  said  Indenture  and  Declaration  of  Trust  acquired 
and  became  entitled  to  certain  other  real  estate  situated  in 
the  State  of  Illinois  and  the  controlling  interest  in  the  Peoples 
Life  Insurance  Company,  Randolph  Building  Corporation, 
Rico  Milk  Products  Company,  and  the  Amboy  Manufacturing 
Company,  which  are  described  in  Exhibit  D  hereto  annexed 
and  made  a  part  hereof  and 

6.  Whereas,  the  party  of  the  second  part  acquired  and 
became  the  owners  of  10,000  shares  of  the  capital  stock  of 
no  par  value  of  the  Rochdale  Wholesale  Company,  a  Corpo- 
ration, and  which  corporation  the  party  of  the  second  part 
used  and  employed  as  an  agency  for  conducting  the  whole- 
sale and  retail  grocery  business,  and  which  corporation  in  the 
prosecution  of  said  grocery  business  installed  certain  ware- 
houses and  retail  grocery  stores  and  provided  certain  fixtures 
in  each  of  said  stores,  and  which  warehouses  and  stores  are 
described  in  Schedule  E  hereto  annexed  and  made  a  part 
hereof,  and 

7.  Whereas,  the  party  of  the  second  part  acting  under 
said  Indenture  and  Declaration  of  Trust  divided  the  said 
trust  estate  into  400,000  'equal  shares  of  beneficial  interests, 


Appendix.  687 

and  sold  and  disposed  of  the  same,  or  the  greater  part  thereof, 
at  the  par  value  of  $25.00  per  share,  and 

8.  Whereas,  the  party  of  the  second  part  in  the  exercise 
of  their  power  to  borrow  money  and  mortgage  said  assets  in 
security  therefor  and  in  furtherance  of  the  trust  plan  to  se- 
cure such  expansion  of  the  trust  business  as  would  justify 
Nation-wide  Co-operation  throughout  the  several  States  as 
rapidly  as  the  conservative  management  of  the  trust  would 
permit,  duly  issued  2,000,000  debenture  interests  of  a  par 
value  of  $50.00  per  share,  and  at  the  same  time  authorized 
the  execution  and  delivery  of  a  trust  deed  to  secure  the  pay- 
ment of  the  same,  and  in  pursuance  thereof  the  party  of  the 
second  part  executed  and  delivered  same  to  George  A.  Abbott, 
Carl  Wisner  and  Viggo  E. '  Bird,  trustees  named  in  the  said 
deed  of  trust,  which  is  attached  hereto  and  marked  Exhibit  F. 
hereinafter  referred  to,  and 

9.  Whereas,  the  grantees,  in  and  by  said  trust  deed,  Ex- 
hibit F,  were  empowered  and  authorized  to  appoint  their 
successors  in  trust  and  have  heretofore,  in  pursuance  of  their 
said  power  and  authority  appointed  W.  S.  Clark,  Gustav 
Kopp  and  Louis  I.  Beock,  of  Chicago,  Illinois,  as  trustees, 
herein  called  the  parties  of  the  first  part,  and 

10.  Whereas,  by  said  trust  deed  Exhibit  F,  the  party 
of  the  first  part  became  vested  with  the  title  as  trustees  to 
all  the  said  property  and  assets,  real,  personal  and  mixed, 
and  all  future  acquisitions,  increment  and  increase  thereof, 
and  all  the  business  and  good  will  of  said  trust  estate  for  the 
benefit  of  the  owners  of  beneficial  interests  therein  and  for 
the  holders  of  beneficial  debenture  interests  thereof,  all  which 
matters  and  things  by  reference  to  said  Exhibit  F  will  fully 
and  at  large  appear,  and 

11.  Whereas,  by  paragraph  23  of  the  said  Trust  Deed, 


688  Trusts  for  Business  Purposes. 

Exhibit  F,  it  is  provided  that  if  for  any  cause  whether  com- 
petitive, economic,  poHtical,  legal  or  official,  the  grantors 
thereof  being  the  party  of  the  second  part  herein  should  be 
attacked  or  molested  in  their  management  or  right  to  carry 
out  and  perform  their  said  Articles  of  Trust  and  for  such 
or  for  any  other  reason  the  grantees  thereof,  should  feel  them- 
selves insecure  or  unsafe  in  and  about  their  trust  as  provided 
by  said  trust  deed.  Exhibit  F,  then  and  in  the  event  thereof, 
the  grantors  thereof  should  ipso  facto  be  and  stand  divested 
of  their  title,  estate  and  possession  in  that  behalf  and  by 
means  thereof  the  grantees,  should  ipso  facto  be  invested 
with  said  title,  estate  and  possession ;  and  thereupon  said  estate 
and  possession  should  be  delivered  to  the  grantees  and  their 
successors  in  trust,  being  the  party  of  the  first  part  hereof, 
to  be  by  them  administered,  managed  and  conducted  as  a 
going  concern  in  furtherance  of  the  intent  and  objects  of  said 
Exhibits  A  and  F  all  which  matters  by  reference  thereto  will 
fully  and  at  large  appear,  and 

12.  Whereas,  the  grantors  thereof  have  been  attacked 
and  molested  in  their  right  to  perform  their  said  trust,  as 
aforesaid,  wherefor  and  for  said  other  reasons  and  causes 
the  party  of  the  first  part  hereof,  under  and  by  virtue  of  the 
said  deed  of  trust,  thereupon  elected  to  and  have  exercised 
their  option,  right  and  power,  vested  in  them  under  and  by 
virtue  of  said  last  mentioned  deed  of  trust.  Exhibit  F,  and  in 
pursuance  thereof  have  heretofore  and  do  hereby  declare  that 
they  have  taken  possession  of  all  and  singular  the  property 
of  said  trust,  real,  personal  and  mixed  of  every  kind  and 
nature,  whatsoever,  and  of  all  of  the  business  and  good  will 
of  the  said  trust,  to  manage  and  dispose  of  the  same  for  the 
best  interest  of  the  holders  of  said  beneficial  interests  and 
of  the  said  beneficial  debenture  interests,  and  now  are  man- 


Appendix.  689 

aging  the  same  as  a  going  concern  for  the  purposes  aforesaid, 
and  the  party  of  the  second  part  by  good  and  sufficient  as- 
signment and  conveyance,  for  further  assurance,  have  here- 
tofore rehnquished  and  conveyed  to  the  party  of  the  first  part 
all  their  right,  title  and  interest  in  and  to  said  property  in  that 
behalf,  in   fee  simple,  and 

13.  Whereas,  the  party  of  the  first  part,  in  and  by  said 
trust  deed.  Exhibit  F,  in  the  event  that  they  should  take  the 
possession  and  management  aforesaid,  are  given  the  power 
by  amendment  or  by  their  declaration  of  a  new  trust  to  re- 
organize said  trust  and  the  business  and  aft'airs  thereof,  to 
change  and  merge  said  debenture  interests  into  beneficial  in- 
terests, and  by  irrevocable  power  to  appoint  trustees  therefor 
to  take  the  absolute  title  in  fee  simple  of  said  real  estate  and 
to  said  assets  and  to  carry  out  and  perform  the  trust  hereby 
declared  for  the  protection  and  benefit  of  the  cestui  que  trust 
aforesaid,  in  the  ultimate  net  profits  and  final  distribution 
of  the  proceeds  of  the  corpus  thereof,  and 

14.  Whereas,  by  diverse  acquisitions  and  increment  and 
further  property,  real,  personal  and  mixed,  the  assets,  busi- 
ness of  the  stores,  warehouses,  office  buildings,  insurance 
company,  subsidiary  companies  and  good  will  of  the  trust 
estate  have  attained  a  value  sufficient  to  justify  expansion  to 
the  proportions  of  interstate  co-operation  and  the  business 
of  the  trust  is  in  a  safe  and  prosperous  condition  for  the 
protection  of  the  cestuis  que  trust,  whereby  they  are  receiving 
the  benefits  of  discounts,  dividends,  interest  and  profits  with- 
out any  unreasonable  deductions  for  salaries,  overhead  charges, 
nor  of  the  usual  division  of  approximately  one-half  of  the 
profits  to  corporate  promoters ;  wherefor  the  party  of  the 
first  part  do  not  deem  it  for  the  best  interest  of  the  trust 
estate,  nor  of  the  cestuis  que  trust  to  foreclose  their  said  trust 


690  Trusts  for  Business  Purposes. 

deed,  Exhibit  F,  for  the  purpose  of  sale  and  distribution  of 
said  assets,  and 

15.  Whereas,  there  are  at  this  time  interested  in  said 
trust  estate  upwards  of  75,000  people,  owners  of  beneficial 
interests  and  debentures,  who  are  dependent  upon  the  pro- 
duction and  distribution  of  food  stuffs  by  and  through  up- 
w^ards  of  100  grocery  stores  and  warehouses  and  upon  the 
outlet  of  production  of  diverse  farms  and  factories  and  which 
producers  and  consumers  are  financially  interested  in  said  trust 
estate  and  look  to  the  diverse  forms  of  business  thereof  for 
the  profits  and  distribution  thereof  to  their  several  interests 
in  said  trust  upwards  of  aggregating  400,000  beneficial  inter- 
ests and  a  substantial  part  of  two  million  beneficial  debenture 
interests  and  the  people  are  rapidly  availing  themselves  of  the 
advantage  of  co-operation  heretofore  extended  to  them  in  the 
manner  hereof,  as  a  welcome  means  of  escape  from  the  uncon- 
scionable profiteering  of  rapacious  tradesmen,  and 

16.  Whereas,  the  party  of  the  first  part,  in  and  by  said 
trust  deed.  Exhibit  F,  upon  taking  possession  of  said  trust 
estate  for  the  causes  aforesaid  are  vested  with  power,  in 
reorganization  of  said  trust  and  the  increase  of  the  assets 
thereof,  to  divide  and  increase  the  corpus  of  the  trust  estate 
and  by  dividing  the  same  into  aliquot  parts,  increase  the  num- 
ber of  beneficial  interests  thereof  in  proportion  to  the  increase 
of  said  assets,  and  to  merge  said  beneficial  debenture  interests 
into  any  increase  in  beneficial  interests,  and 

17.  Whereas,  the  economical  and  successful  administra- 
tion of  said  trust  estate  in  its  diverse  ramnifications  of  various 
kinds  of  business,  mercantile,  financial  and  industrial,  of  pro- 
duction, transportation  and  distribution,  co-operating  for  mu- 
tual success,  requires  the  systematic  training  of  talent  in  the 
several  lines  thereof  and  therewith  the  creation  of  a  reason- 


I 

I 


Appendix.  691 

ably  permanent  tenure  of  employment  to  such  expert  talent, 
so  as  to  minimize  the  attendant  cost  and  loss  of  labor  turn- 
over, which  only  the  absolute  and  permanent  control  of  a 
common  law  trust  with  succession  by  means  of  transferable 
shares  will  permit  in  a  dependable  degree,  and 

18.  Whereas,  by  means  of  the  prevalent  form  of  busi- 
ness organization  throughout  the  country  and  the  country- 
wide associations  of  manufacturers,  wholesale,  retailers,  bank- 
ers and  transportation  companies,  the  business  of  the  country 
has  ceased  to  be  conducted  by  the  laws  of  economics  but  has 
become  a  system  of  organized  plunder  perpetrated  upon  the 
producer  and  the  consumer,  and 

19.  Whereas,  by  the  prevalent  methods  of  transportation, 
storage,  distribution  and  marketing  of  the  products  of  farms 
and  of  factories  handling  such  products,  the  distributors  and 
dealers  in  such  commodities  systematically  resort  to  every 
species  of  fraudulent  degrading,  forestalling,  engrossing  and 
monopolizing  the  supply  and  the  means  whereby  the  supply 
of  such  products  should  flow  freely  to  the  consumer  at  prices 
fixed  by  the  law  of  supply  and  demand  and  thereby  in  repress- 
ing and  destroying  the  supply  and  in  fraudulent  and  oppres- 
sive practices  in  and  about  the  making  of  returns  as  to  clas- 
sifications, grading  and  prices  to  the  producer  for  his  products 
based  on  the  cost  of  production,  the  dealer  fixes  a  fictitiously 
low  price  to  the  producer  and  by  means  of  the  repression  and 
destruction  of  the  supply  the  associated  dealers  fix  a  fictitiously 
high  price,  to  the  consumer,  and 

20.  Whereas,  by  the  common-law  and  the  law  of  eco- 
nomics, the  interest  of  the  producer  and  the  consumer,  in  the 
flow  of  commodities,  is  the  primary  desideratum  and  the  art 
of  competitive  trading  by  tradesmen  as  an  occupation  for 
profit  is  secondary  thereto  and  becomes  parasitic  by  the  pre- 


692  Trusts  for  Business  Purposes. 

vailing  associations  of  traders  whereby  by  common  consent 
and  conspiracy  prices  are  artfully  manipulated  to  the  detri- 
ment of  the  producers  and  consumers,  and 

21.  Whereas,  the  professional  traders  and  financiers  of 
the  country  apply  their  activity  on  the  theory  that  the  public 
is  legitimate  prey  for  commjercial  and  financial  exploitation, 
and  that  the  manipulation  of  the  resources  of  the  nation, 
pubHc  and  private,  are  fit  subjects  for  private  plunder,  and 
so  have  become  a  by-word  and  reproach  to  all  modern  eco- 
nomic methods  and 

22.  Whereas,  the  public  authorities  do  not  enact  adequate 
laws  prohibiting  fraudulent  degrading,  forestalling,  engrossing 
or  monopolizing  of  the  supply,  or  facilitating  the  means  of 
transportation  and  distribution  and  dO'  not  enforce  such  laws 
as  are  enacted  to  that  end  and  make  no  effort  to  punish  the 
destroyers  of  crops  and  commodities  in  the  field  or  in  transit, 
and  thereby  the  "flow  of  commodities"  has  become  merely 
a  "stream  of  profit''  to  the  trader  in  which  the  law  of  supply 
and  demand  is  a  negligible   factor,  and 

23.  Whereas,  the  producer,  whether  of  farm  commodities 
or  other  products  of  labor,  though  he  cannot  fix  the  price  of 
his  products,  is  required  to  pay  for  his  supplies  and  machinery 
such  prices  to  dealers  and  manufacturers  as  are  fixed  artfully 
and  fictitiously  by  so-called  "economists"  or  "statisticians"  who 
are  commonly  employed  to  make  such  prices  as  the  public  re- 
gardless of  supply  are  supposed  to  be  "able"  and  can  be  made 
to  pay,  and  thereby  the  law  of  supply  and  demand  has  become 
a  system  of  fictitious  practices  by  tradesmen  to  the  detriment 
of  the  producer  and  the  consumer,  and 

24.  Whereas,  by  the  business  methods  herein  mentioned, 
commercialism  as  ordinarily  practiced  has  become  a  national  vice 
and  is  the  source  of  the  most  imminent  public  danger,  the  at- 


Appendix,  693 

tempted  curbing  of  which  by  so-called  anti-trust  legislation  has 
been  attended  by  administrative  sham  battles  in  the  face  of 
which  the  highest  court  of  the  land  has  declared  that  it  cannot 
base  its  decisions  upon  the  principles  of  economic  law,  and 
the  increment  of  property  values  of  the  country  by  the  exploita- 
tion practiced  upon  the  producers  and  the  consumers  has  gravi- 
tated to  the  hands  of  an  unduly  restricted  number  of  persons, 
and 

25.  Whe;re;as,  by  the  common  law  the  producers  and  con- 
sumers of  the  country  primarily  have  the  unquestionable  right, 
until  they  deprive  themselves  thereof  by  prohibitive  amendment 
of  state  constitutions  or  unwittingly  fail  to  adopt  constitutional 
amendments  to  curb  state  legislatures  from  enacting  legislation 
prohibiting  co-operation  in  the  production  and  distribution  of 
the  commodities  of  life,  at  fair  prices  according  to  the  law  of 
supply  and  demand,  whereby  the  people  will  derive  the  benefits 
and  profits,  free  from  the  exploitations  of  fraudulent  and 
vicious  commercialism,  and  thereby  effectuate  the  principle  that 
government  is  instituted  among  men  to  protect  the  weak  against 
the  aggressions  of  the  strong  and  cunning  and 

26.  Whereas,  it  is  the  fundamental  merit  of  the  co-opera- 
tive plan  hereinafter  set  forth,  whereby  the  trust,  as  an  organi- 
zation, retains  no  profit  whatsoever  for  itself,  but  that  all  the 
profits  go  to  the  cestui  que  trust ;  that  such  advantages  go  to  the 
people  as  a  whole  and  are  therefore  an  economic  factor  which 
operates  to  the  universal  betterment  of  the  community;  that 
such  merit  broadly  distinguishes  the  co-operative  trust  plan 
from  close  business  organizations  which  are  designed  primarily 
to  build  up  and  accumulate  private  fortunes  for  the  promoters 
and  organizers  of  business  enterprise;  that  in  the  co-operative 
trust  plan  are  wholly  absent  the  motives,  temptations,  means 
and  effects  in  the  disposal  of  beneficial  interests  to  the  general 


694  Trusts  for  Business  Purposes. 

public,  which  have  been  instrumental  in  bringing  stock  selling 
operations  of  close  business  organizations  under  the  scrutiny 
of  the  police  power  of  the  several  states  whereby,  by  means  of 
so-called  "Blue-sky  Laws"  it  is  attempted  to  prevent  the  issu- 
ance of  securities  which  would  operate  to  defraud  the  public 
and  that,  therefore,  the  issuance  of  beneficial  interests  of  the 
co-operative  trust  hereof  is  not  within  the  evil  and  hence  not 
within  the  purview,  prohibitions,  requirements  nor  sanctions  of 
such  legislation.  For  the  reasons  stated,  the  departments,  ad- 
ministering such  legislation  in  the  various  states,  will  apprehend 
that  the  "Blue-sky  Laws"  of  the  several  states  are  unscientific  in 
conception,  form  and  substance;  concentrate  the  marketing  of 
corporate  securities  in  the  hands  of  "Special  Interests"  com- 
monly allied  with  what  is  known  as  "Invisible  Government;" 
fail  to  take  into  account  the  rule  that  commercial  and  industrial 
enterprise  is  almost  invariably  established  by  money  gathered 
from  the  people  and  almost  never  by  the  capital  of  banks ;  that 
banks  or  other  "money  interests"  do  not  "assist"  enterprise  be- 
fore the  potential  values  of  enterprise  are  "established"  but 
pursue  them  as  a  fat  source  of  loot  after  they  are  "established ;" 
ignore  the  fact  that  success  in  dealing  with  a  bank  is  measured 
by  the  ability  of  the  enterprise  to  conceal  the  necessity  for  such 
"assistance;"  fail  to  put  the  frauds  of  stock-jobbing  and  market 
manipulations  of  the  "interests"  on  the  same  footing  with  "wild 
cat"  securities ;  base  issues  on  reputation  rather  than  character 
of  securities ;  put  quotations  of  securities  on  the  curb  or  ex- 
change on  a  par  with  the  qualities  of  government  or  municipal 
bonds;  take  no  account  of  quotations  procured  by  fraudulent 
manipulations  of  securities  listed  on  stock  exchanges  and  boards 
of  trade;  provided  no  means  of  distinguishing  between  wild  cat 
speculations  and  bona  fide  potential  earning  power ;  depend  for 
their  administration  on  fancy,  prejudice,  discrimination  and  ca- 


Appendix.  695 

price  rather  than  fact  and  means  and  methods  of  sound  judg- 
ment; and  thereby  subject  securities  to  the  bhght  of  public 
prejudices,  regardless  of  merit,  and  discourage  investments 
therein  by  the  people,  and 

27.  Whereas,  there  is  not  presently  available  any  form  of 
statutory  incorporation  by  which  the  affairs  of  the  trust  estate 
could  practically  be  administered  so  as  to  give  the  cestuis  que 
trust  all  the  profits  and  at  the  same  time  permit  any  reasonable 
permanence  of  the  rights  of  the  trustees  and  the  talent  employed 
in  such  an  estate;  in  v^hich  respect,  also,  the  costs  of  statutory 
incorporation;  the  perennial  exactions  of  visitorial  administra- 
tion; the  constitutional  impediments  to  interstate  migration; 
the  great  diversity  and  constantly  changing  and  vexatious  legis- 
lation of  the  several  states  and  multitudinous  and  conflicting  re- 
quirements as  to  reports ;  and  the  increasing  tendency  to  regard 
the  status  of  statutory  incorporation  as  a  fruitful  source  of 
revenue  instead  of  a  means  of  defraying  merely  the  costs  of 
administration,  renders  any  statutory  incorporation  cumbersome 
and  vexatious  and  unduly  expensive  and  prohibitive  and  in- 
imical to  the  best  interests  of  such  an  estate  and  of  the  cestuis 
que  trust  thereof ;  and  wherefore  the  party  of  the  first  part 
deem  it  for  the  best  interests  of  the  estate  and  for  the  cestuis 
que  trust  to  create  and  declare  a  trust  estate  of  the  said  assets, 
business  and  good  will  subject  to  all  encumbrances,  debts, 
claims  and  demands  whatsoever  in  that  behalf  as  hereinafter 
provided,  and 

28.  Whereas,  the  party  of  the  second  part  under  said  In- 
denture and  Declaration  of  Trust,  Exhibit  A,  heretofore  issued 
approximately  400,000  interests,  the  certificates  of  which  in 
words  and  figures  are  substantially  as  follows,  to-wit: 


696  Trusts  for  Business  Purposes. 

$25.00  $25.00 

Beneficiary  Certificate 

General  Offices  Chicago,  Illinois. 

Number  Beneficial  Interests. 

THE  CO-OPERATIVE  SOCIETY  OF  AMERICA. 

A  Common  Law  Trust. 

400,000  Beneficial  Interests  $25.00  Each. 

This  is  to  Certify  That is  the 

holder  of Beneficial  Interests  in  The 

Co-Opeeative  Society  of  America.  This  Certificate  is  one  of  a  series 
of  certificates  issued  by  the  Trustees  of  the  said  Society,  said  Cer- 
tificates representing  in  all  Four  Hundred  Thousand  Beneficial  In- 
terests of  Twenty-Five  Dollars  each.  The  certificates  and  the 
Interests  represented  thereby  are  non-assessable  and  are  described 
in  and  are  subject  to  a  Declaration  of  Trust  in  favor  of  said  Society, 
dated  the  Twentieth  day  of  February,  1919.  The  Certificates  are 
transferable  on  the  books  of  the  Society  by  the  holder  or  holders 
in  person  or  by  Attorney  upon  surrender  and  proper  endorsement. 
The  holder  hereof  shall  be  entitled  to  his  or  her  proportionate  share 
of  the  benefits  arising  from  the  operation  of  the  Society  by  the 
Trustees  named  in  said  Declaration  of  Trust,  or  by  their  successors, 
payable  as  the  said  Trustees  may  from  time  to  time  elect. 

Dated  this day  of 19... 

The  Co-Operative  Society  of  America. 


I 


By. 


.and 


Trustees. 
29.     Whereas,   the   party   of    the   second   part   under   said 
trust  deed,   Exhibit   F,  heretofore  issued   2,000,000  beneficial 
debenture  interests,  the  certificates  of   which  in  form  are  in 
words  and  figures  substantially  as  follows,  to-wit : 

FORM  OF  DEBENTURE. 

$50.00  each  $50.00  each 

General  Offices  Chicago,  Illinois 

Number Beneficial  Debenture  Interests 

THE  CO-OPERATIVE   SOCIETY  OF  AMERICA. 
A  Common  Law  Trust  For  National  Co-Operation. 
This  is  to  Certify,  that 


Appendix.  697 

is  the  holder  of Beneficial  Debenture  Interests 

in  The  Co-Opeeative  Society  of  America,  of  a  par  value  of  Fifty- 
Dollars  ($50.00)  each.  This  certificate  is  one  of  a  series  of  certifi- 
cates issued  by  the  Trustees  of  the  said  Society,  said  certificates 
representing  in  all  two  million  benefits  of  a  par  value  of  fifty  dollars 
each.  The  certificate  and  the  interests  represented  hereby  are  non- 
assessable and  are  authorized  by  a  Declaration  of  Trust  in  favor 
of  said  Society  dated  the  Twentieth  day  of  February,  1919,  and  are 
secured  by  a  Trust  Deed  to  George  A.  Abbott,  Carl  Wisner,  and 
Viggo  E.  Bird,  Trustees,  and  are  subject  to  the  terms  thereof,  are 
transferable  on  the  books  of  the  Society  by  the  holder  or  holders 
to  the  extent  of  20  shares  only  by  one  person  in  person  or  by  at- 
torney upon  surrender  and  proper  endorsement.  The  holder  hereof 
shall  be  entitled  to  his  or  her  proportionate  share  of  all  the  profits 
and  benefits  arising  from  the  operation  of  the  Society  by  the 
Trustees  named  in  said  Declaration  of  Trust,  or  by  their  successors, 
payable  as  the  said  Trustees  may  from  time  to  time  elect;  and  are 
payable  as  to  principal  at  the  maturity  of  said  trust  or  convertible 
at  the  option  of  the  holder  as  provided  in  the  trust  deed  securing 
the  same.  Any  purchases,  sale  or  ownership  of  more  than  twenty 
shares  is  null  and  void  to  the  extent  of  the  excess. 
Dated  This day  of 19 . . . 


.and 


Trustees 

30.  Whereas,  said  beneficial  interests  of  an  expressed 
value  of  $25.00,  by  reason  of  their  increase  in  value,  are  by  said 
trust  deed,  Exhibit  F,  made  convertible  share  for  share  into  said 
beneficial  debenture  interests  of  a  par  value  of  $50.00  each, 
and 

31.  Whereas,  a  portion  of  said  twenty-five  dollar  interests 
have  been  converted  and  exchanged  and  are  in  process  of  ex- 
change by  the  holders  for  said  fifty  dollar  debentures  and  an- 
other portion  of  said  debentures  have  issued  and  the  remainder 
are  in  process  of  issue  to  other  contributors  to  said  trust  estate, 
both  of  which  forms  of  interests  are  hereby  convertible  into 
interests  issued  hereunder. 


698  Trusts  for  Business  Purposes. 

Title. 
32.     Now,  Therefore,  in  consideration  of  the  premises  and 
of  the  acceptance  hereof  by  the  party  of  the  second  part,  under 
and  by  virtue  of  the  power  granted  in  said  deed  of  trust,  Ex- 
hibit F,  the  party  of  the  first  part,  W.  C.  Clark,  Gustav  Kopp 
and  Louis  I.  Block  as  trustees,  hereby  declare  and  estabhsh 
a  trust  as  at  common  law  (not  intended  to  be  a  partnership  nor 
a  joint  stock  company,  nor  any  form  of  associatioin  of  the  cer- 
tificate holders  inter  sese)    and  appoint  thereto  the  party  of 
the  second  part,  as  trustees,  and  grant,  remise,  release,  convey, 
alien,  confirm  and  quit  claim,  sell,  assign,  and  deliver  to  them, 
Harrison  M.  Parker,  Viggo  E.  Bird  and  John  Coe,  as  trustees 
hereinafter  referred  to,  all  the  said  property,  real,  personal  and 
mixed  which  was  of  the  said  trust  estate  as  by  the  said  Exhibits 
A,  B,  C,  D,  E  and  F,  which  are  hereto  annexed  and  made  part 
hereof,  the  same  to  all  intents  as  if  said  property  therein  de- 
scribed and  referred  to  were  here  now  fully  described  and  set 
forth,  reference  being  had  thereto,  will  fully  and  at  large  ap- 
pear, and  all  the  rights,  tenements  and  hereditaments  thereto 
appertaining  and  belonging,  and  all  other  and  further  additions, 
accumulations   and  accretions  thereto  at  any   future  time  to- 
gether with  all  the  business,  good  will,  assets,  rights  and  credits 
which  were  of  the  said  trust  estate  heretofore  designated  as 
The  Co-Operative  Society  of  America,  To  Have  and  to  Hold 
the  same  to  them  and  their  successors  and  assigns  in  fee  simple, 
and  to  stand  seized  of  all  the  right,  title  and  interest  therein 
and  possession  thereof  in  law  and  equity,  and  to  convert  the 
same  into  personalty  as  rapidly  as  the  trust  business  will  per- 
mit in  the  discretion  of  the  trustees  and  subject  to  all  encum- 
brance, debts,  claims  and  demands  whatever,  contracted  in  the 
business  as  heretofore  conducted,  for  the  uses  and  trust  herein 
declared,  to-wit: 


Appendix.  699 

Aliquot  Parts  and  Increases. 

33.  The  trust  estate  of  the  corpus  at  present  ascertained  is 
divided  into  two  miUion  (2,000,000)  interests  of  a  par  vahie 
of  Fifty  ($50.00)  Dollars  per  intere.st,  to  be  disposed  of  in  the 
discretion  of  the  trustees. 

The  Trustees,  in  the  course  of  the  trust  business  herein  estab- 
lished, are  empowered  to  increase  the  corpus  of  the  trust  es- 
tate by  accepting  further  contributions  of  property  or  cash  and 
any  such  contributions  of  cash,  whether  or  not  the  same  may 
be  immediately  invested  in  the  purchase  of  property,  or  whether 
used  to  purchase  or  invest  in  property  of  a  permanent  nature  or 
in  fluctuating  property  such  as  stocks-in-trade  or  whether  used 
in  the  payment  of  incumbrances  or  other  debts,  shall  be  taken 
and  held  to  be  an  increase  in  and  addition  to  the  corpus  of  the 
trust  estate  and  be  divided  into  aliquot  parts  or  interests  of  a 
par  value  of  Fifty  ($50.00)  Dollars  each  to  the  extent  of  such 
increase  and  addition  to  the  trust  estate,  and  to  the  amount 
thereof  the  Trustees,  may  immediately  dispose  of  beneficial  in- 
terests at  par  or  at  such  price  as  the  same  may  be  by  the  Trus- 
tees deemed  to  be  worth,  having  in  view  the  accretion  by  profits 
and  good  will  to  the  whole  trust  estate  and  by  the  method  so 
provided  the  Trustees  may  increase  the  issuance  and  disposi- 
tion of  beneficial  interests  to  any  amount  to  which  the  corpus 
of  the  trust  estate  may  be  increased  up  to  and  beyond  said  two 
million  (2,000,000)  interests  to  any  extent  and  without  limit 
whatsoever  and  without  the  necessity  of  any  further  authori- 
zation by  amendment  hereof. 

Scope. 

34.  The  Trustees  in  the  Co-operative  management  of  the 
property  and  business  of  the  trust  may  acquire,  hold,  manage, 
lend,  donate,  use,  barter  and  exchange,  pledge,  mortgage,  or  sell, 


700  Trusts  for  Business  Purposes. 

deal  or  trade  in  any  and  all  kinds  of  property,  whatsoever,  and 
in  relation  thereto  may  conduct  any  and  all  kinds  of  business 
whatsoever;  may  acquire,  hold,  conduct,  or  dispose  of  any  and 
all   kinds    of    mercantile,    industrial,    manufacturing,    financial 
transporting,  storage  or  refrigerating  business  whatsoever ;  en- 
gage in  any  and  all  kinds  of  technical,  professional,  industrial, 
social,  educational  and  publicity  enterprise  or  business  v/hatso- 
ever;  acquire,  hold,  operate  and  dispose  of  mines  or  deposits 
of  ore,  coal,  stone,  ocher,  megnesite,  or  any  and  all  clays,  earth 
products  or  mineral  substance;  oil  and  gas  wells  and  pipe  lines 
and  refineries ;  forests,  saw-mills  and  lumber  yards,  fisheries 
and  canneries ;  smelters  and  rolling  mills ;  coke  ovens  and  lime 
kilns;    carbide    works;    factories    for    the    manufacturing    of 
clothing;  boots  and  shoes,  and  building  material;  canneries  of 
food  stuffs  of  all  kinds;  car  shops  and  railway  rolling  stock; 
shops  for  the  building  of  automobiles,  wagons  and  other  ve- 
hicles; hangars  and  aeroplanes  and  seaplanes;  all  manner  of 
building  material  and  sources  of  material,  and  means  of  manu- 
facture thereof ;  manufacturers  of  and  dealing  in  farm  machin- 
ery ;  all  manner  of  foundries,  smithies  and  machine  shops ;  ship 
yards ;  locomotive  works,  textile  mills  and  factories ;  carpenter 
shops  ;  paint  shops ;  plumber  shops  ;  decorators  and  architectural 
business  and  all  manner   of   building  operations,   contracting, 
constructions,  engineerings,  trades  and  business ;  the  production 
and  dealing  in  dyestuffs;  all  manner  of  dealing  in  medicines, 
arts,  sciences  and  crafts;  have  all  manner  of  patents  of  inven- 
tions of  or  concerning  machines,  methods,  process,  substances 
and  designs,  trademarks  and  copyrights  in  and  about  any  and 
all  of  the  manufactures,  business,  trades,  arts,  commodities  or 
means  whatsoever  herein  mentioned;  all  manner  of  ways  and 
means  of  transportation  by  land  and  water  and  aeroplanes ;  all 
manner  of  electrical  apparatus  and  machinery,  telegraphy,  tele- 


Appendix.  7^1 

phone  and  wireless;  transmission  of  electrical  currents  for  all 
purposes;  warehouses,  docks,  tugs,  ships  and  steamers;  rail- 
roads, rolling  stock  freight  houses  and  passenger  stations  and 
street  railways  and  interurban  railways  and  franchises  for  the 
same ;  grain  elevators,  stock  yards ;  creameries,  cheese  factories, 
condensories,    drying,    dehydrating    and    dessicating    establish- 
ments; public  markets;  furniture  and  musical  instrument  fac- 
tories; printing  plants;  newspapers  and  periodicals  and  bind- 
eries; advertising;  all  manner  of  wholesale  and  retail  stores  of 
food  stufifs,  tobacco,  cigars,  sporting  goods,  jewelry,  wearing 
apparel  and  adornment  and  housing  material ;  farming  farms  and 
farm  crops ;  dealing  in  and  making  of  farm  machinery  and  im- 
plements; producing,  manufacturing  and  marketing  the  prod- 
ucts of  farms,  factories,  mines,  forests,  streams,  oil  fields  and 
shale,  and  all  earth  deposits  and  substances  whatsoever ;  and  to 
acquire,  hold,  vote,  in  person  or  by  proxy,  deal  in  and  dispose 
of  all  manner  of  corporate  stock  or  securities,  or  buy  and  con- 
vert the  beneficial  interest  of  any  companies  or  common  law 
trusts,  engaged  in  any  and  all  kinds  of  business  or  manufacture, 
and  the  stocks  of  insurance  companies,  of  all  kinds  of  trust  or 
guaranty  companies,  or  banks  and   safety  deposit  companies, 
office  buildings,  hotels  and  restaurants,  telegraph,  telephone  and 
aerial  transportation  lines  and  submarine  transports ;  to  con- 
tract for,  buy,  barter,  sell  and  convey  in  any  transactions  con- 
cerning any  and  all  of  said  properties  and  business  in  like  man- 
ner as  an  individual ;  to  have  a  common  seal ;  to  have  succession 
by  transfer  of  shares ;  to  sue  and  be  sued ;  to  sue  for  and  re- 
cover upon  all  contracts,  claims  and  debts ;  to  settle,  compro- 
mise or  submit  to  arbitration  any  disputes  and  controversies ;  to 
borrow  and  lend  money  or  securities;  to  receive  money  on  de- 
posit and  discount  commercial  paper  where  not  prohibited  by 
statute;  pledge  or  mortgage  their  assets;  pledge  their  credit; 


702  Trusts  for  Business  Purposes. 

guaranty  and  assure  or  underwrite  the  issues,  obligations  and 
credits  of  corporations,  firms,  individuals,  estates  or  trusts;  is- 
sue scrip,  notes,  bonds,  mortgages  or  other  evidence  of  debts 
and  interests,  indebtedness  or  obligations  whatsoever;  declare 
and  pay  dividends  and  participation  benefits  in  cash  or  to  pay 
the  same  in  scrip  or  other  dividend  certificates  out  of  the  net 
profits  or  out  of  the  proceeds  of  the  trust  in  cash  or  by  division 
in  specie;  to  invest  and  re-invest  the  funds  of  the  trust;  to 
create  and  establish  sinking,  amortization,  guaranty  and  assur- 
ance funds,  whether  the  nucleus  thereof  be  derived  from  the 
trust  or  from  investors  in  the  trust  or  from  the  trustees  hereof 
or  from  any  corporation,  firm,  trust  or  individual  dealing  with 
the  trust  or  whether  such  nucleus  be  formed  by  trust  funds  out 
of  profits  or  corpus  or  with  securities  of  governments,  munici- 
palities, corporations,  firms  or  individuals  or  by  the  purchase  as 
of  the  present  worth  of  any  given  fund,  policy  or  undertaking 
of  whatsoever  nature  or  kind  maturing  at  a  given  future  date. 

Proeits. 

35.  The  cestuis  que  trust,  ultimately  shall  be  entitled  to  all 
the  net  profits  of  the  trust  enterprise  which  may  remain  over 
and  above  encumbrances,  liens,  charges,  debts,  claims,  expenses, 
costs,  wages  and  salaries  in  and  about  the  management  of  the 
property  and  business  of  the  trust  estate. 

Plan. 

36.  The  business  and  property  of  the  trust  estate  sliall  be 
conducted  and  managed  so  as  to  procure  the  greatest  possible 
co-operation  among  and  between  the  elements  of  production, 
transportation  and  distribution  at  the  least  possible  expense  of 
providing  the  free  flow  of  commodities  between  the  producers 


Appi:NDix.  703 

and  the  consumers  on  the  basis  of  supply  and  demand,  and  with- 
out profit  to  the  trust  as  an  intermediary  trading  organization 
over  and  above  the  cost  of  administration  and  to  avoid  and  pre- 
vent the  fraudulent  engrossing  of  trade,  product  or  means  of 
distribution  and  of  arbitrarily  fixing  of  prices  to  producer  and 
consumer. 

AlIvOTmSnts,  Priorities  and  Conversions. 

37.  The  trustees  have  and  hereby  do  set  aside  and  allot  not 
exceeding  400,000  of  the  said  beneficial  debenture  interests 
heretofore  issued,  the  same  to  be  used  in  substitution  for  such 
outstanding  beneficial  interests  as  have  heretofore  been  issued, 
at  the  option  of  the  holders  thereof,  share  for  share,  without 
loss  of  priority  to  the  extent  of  the  value  of  said  10,000  shares 
of  Rochdale  Stock  or  substitutions  therefor  as  herein  elsewhere 
provided. 

38.  The  trustees  at  their  option,  after  the  ensealing  hereof, 
may  continue  the  further  disposition  of  said  debenture  inter- 
ests or  in  lieu  thereof,  so  far  as  the  number  authorized  may  be 
undisposed  of  and  in  addition  thereto  for  any  increase  of  corpus 
thereafter,  may  issue  a  certificate  in  form  which  in  words  and 
figures  shall  be  substantially  as  follows,  to-wit : 

Form  of  Certificate. 

$50.00  Each  Certificate  No $50.00  Each 

General  Offices  Chicago,  Illinois 

Numbers  To  

Both  Inclusive  Beneficial  Interests 

The  Co-Operators  of  America 
known  as 
The  Co-OpEaiATiVE  Society  of  America. 
A  Common  Law  Trust  For  National  Co-operation. 
This  certifies  that  by  reason  of  the  organization  of  the  co-opera- 
tive elements  of  production  and  distribution  by  the  undersigned  to 
overcome  the  prevailing  evil  practices  of  manufacturers,  distributors 


704  Trusts  for  Business  Purposes. 

and  traders tias  contributed  to  and 

is  the  owner  of Beneficial  Interests  of  an  expressed 

value  of  $50.00  each  fully  paid  and  non-assessable  in  the  Trust 
Estate  of  the  undersigned  otherwise  known  as  The  Co-Opeeative 
Society  of  America,  a  Common  Law  Trust,  created  under  Articles 
of  Trust  providing  for  the  pro  rata  payment  of  all  the  participating 
distributive  benefits  and  profits  of  the  Trust  Estate  to  the  owners 
of  the  Beneficial  Interests. 

The  holder  hereof  is  entitled  to  the  benefit  of  collective  buying 
and  other  co-operative  advantages  of  production  and  marketing  and 
other  business  by  the  affiliated  enterprises  of  the  trust  operations, 
which  may  be  realized  by  the  undersigned  trustees. 

Any  sale,  purchase  or  ownership  by  any  one  person  of  more  than 
twenty  interests  is  void  as  to  the  excess.  Interests  to  the  number 
of  twenty  only  in  any  one  individual  are  transferable  by  endorsement 
and  delivery  of  certificates  thereof  and  the  transfer  on  the  books 
of  the  Trustees  in  person  or  by  Attorney  in  Fact,  which  transfer 
record  is  conclusive  evidence  of  ownership. 

Dated  this day  of 19. . . 

( Seal) 

( Seal) 

( Seal) 

Trustees. 

39.  The  said  beneficial  debenture  interests  sold  for  cash  and 
now  outstanding  shall  have  preference  on  all  the  property,  real, 
personal  and  mixed  wherever  situated  of  the  trust  estate  but  in 
case  it  should  appear  at  the  dissolution  and  distribution  of  the 
trust  estate  that  the  proceeds  of  sale  thereof  shall  not  be  suffi- 
cient to  pay  all  beneficial  interests  and  debentures,  then  out- 
standing, then  said  interests  remaining  uncontroverted  into  de- 
bentures and  the  debentures  substituted  therefor  shall  have  pri- 
ority in  so  far  as  concerns  the  present  value  of  said  10,000 
shares  of  Rochdale  Wholesale  Company  stock  or  stibstittitions 
therefor  now  in  the  trust  estate  to  the  extent  of  the  said  inter- 
ests converted  and  unconverted  to  the  amottnt  of  $57.50  per 
interest.  The  priority  so  given  shall  inhere  in  any  debentures 
which  may  be  substituted  for  beneficial  interests  but  the  differ- 


Appendix.  7^5 

ence  in  value  in  such  exchange  shall  not  be  construed  as  a 
premium,  bonus  or  right :— provided  that  the  trustees  may  give 
such  suitable  right  on  such  substitution  as  to  them  may  seem 
proper,  in  which  event  said  priority  will  be  superseded,  satisfied 
and  displaced. 

40.  The  holders  of  said  400,000  beneficial  interests  and  the 
holders  of  said  debentures  whether  received  in  exchange  for 
said  beneficial  interests  or  paid  for  in  cash  may  at  the  option  of 
the  holders  be  exchanged  for  the  beneficial  interests  hereby  pro- 
vided share  for  share  with  such  rights  as  the  trustees  may  deem 
fair  and  proper. 

41.  The  said  interests  to  the  number  of  debentures  remain- 
ing unallotted  and  undisposed  of  shall  be  transferable  by  en- 
dorsement and  transfer  in  person  or  by  proxy  upon  the  books 
of  the  trustees.    The  disposition  of  said  undisposed  of  interests 
and  the  substitutions  of  said  400,000  debentures  for  said  out- 
standing beneficial  interests  shall  be  made  by  and  under  the 
supervision  of  the  trustees  or  as  herein  otherwise  provided. 
Any  sale  or  sales  or  ownership  of  more  than  twenty  debentures 
or  interests  to  or  for  any  one  person,  directly  or  indirectly  is  in- 
imical to  the  co-operative  enterprise  and  shall  be  deemed  and 
be  null  and  void  and  the  excess  above  twenty  interests  shall 
not  be  entitled  to  registry  or  transfer  on  the  books  of  the  trus- 
tees nor  be  entitled  to  recognition  in  the  payment  of  dividends 
or  distribution  of  profits  or  principal.     Neither  shall  any  sales 
of  interests  be  made  unless  at  least  80%  of  the  proceeds  be 
paid  free  of  all  charges  or  deductions  to  the  Trustees,  and  upon 
receipt  of  contributions  for  said  interests  the  Trustees  shall  ap- 
ply the  same  in  units  of  $1000.     In  acquiring  further  shares  of 
the  capital  stock  of  said  Rochdale  Wholesale  Company  or  other 
subsidiary  corporation  or  trust  which  may  be  used  as  an  agency 
in  accomplishing  the  co-operative  enterprise  of  the  trust  estate 


7o6  Trusts  for  Business  Purposes. 

or  other  approved  and  secured  income  bearing  or  profit  sharing 
stocks  or  bonds  and  real  estate  or  preferably  in  the  shares  of 
said  subsidiary  trust  agencies  of  the  grantors'  trust  estate  or 
other  property,  real,  personal,  or  mixed,  as  additions  to  the 
corpus  of  the  trust  estate. 

42.  The  said  real  estate  situated  in  the  State  of  Michigan  is 
subject  to  certain  contracts  of  sale  heretofore  entered  into  for 
amounts  aggregating  approximately  $350,000.00  but  the  pro- 
ceeds of  sale  thereof,  as  promptly  as  the  same  shall  be  received 
shall  be  invested  in  other  real  estate  or  in  income  bearing  or 
profit  sliaring  stocks;  interests  in  common  law  trusts  or  bonds 
or  stocks  of  various  corporation  agencies,  which  the  Trustees 
use  in  the  performance  of  their  trust. 

43.  In  case  by  existing  contracts  or  otherwise,  there  shall 
be  disposed  of,  any  of  the  real  estate  or  securities  heretofore 
agreed  to  be  sold,  and  any  of  the  parties  interested  in  such 
sales  will  deposit  the  reasonable  market  price  thereof  in  escrow 
subject  to  this  trust,  whereby  the  trustees  may  receive  and  ap- 
ply the  same  in  the  purchase  of  other  real  estate  or  securities 
of  equal  or  greater  value  for  the  trust  estate  then  the  Trustees 
shall  release  the  said  real  estate,  but  the  purchaser  thereof  shall 
not  be  required  to  see  to  the  application  of  the  purchase  money 
paid  by  him. 

44.  The  Trustees  shall  continue  to  permit  the  conversion  of 
said  beneficial  interests  and  out  of  the  contributions  for  the 
further  disposition  of  beneficial  interests  invest  a  suitable  part 
thereof  in  stock  of  said  Rochdale  Wholesale  Company,  its  as- 
signee or  other  agency  in  that  behalf,  and  thereby  enable  said 
company  or  its  successor  to  establish  the  quota  of  stores  and 
marketing  facilities  commensurate  with  a  suitable  proportion 
of  interests  at  any  time  issued  and  the  Trustees  may  otherwise 
carry  out  the  intent  of  said  Articles  of  Trust,  Exhibit  A,  and 


Appendix.  707 

trust  deed,  Exhibit  F,  which  they  may  deem  necessary,  for  the 
profit  and  security  of  all  parties  as  their  interests  by  previous 
subscriptions  for  interests  on  partial  payments  fully  performed 
may  appear,  including  the  practice  of  allowing  discounts  on 
purchases  made  and  interest  on  partial  payments  by  holders  of 
beneficial  interests  or  debenture  interest  holder  of  this  trust 
estate. 

Administrative  Powers  in  General. 

45.  The  party  of  the  second  part  acting  in  their  collective 
caimcity  as  Trustees  and  herein  referred  to  as  the  Trustees  and 
as  the  Board  of  Trustees,  shall  so  far  as  practicable  be  desig- 
nated as  The  Co-operators  of  America  in  and  about  their  form 
of  advertisement  of  doing  business  and  thereby  for  brevity  and 
convenience  may  execute  their  contracts  and  business  engage- 
ments so  far  as  such  form  and  style  shall  not  be  contrary  to 
law;  own  property  and  conduct  all  kinds  of  business  without 
limit  of  extent  or  value;  shall  have  power  and  discretion  to  sell 
any  of  the  property  of  the  trust  estate,  real,  personal  and  mixed, 
and  convert  the  same  into  cash  for  the  purposes  of  the  business 
of  the  trust  herein  provided ;  hold  the  legal  title  to  all  property 
at  any  time  belonging  to  the  trust  and  shall  have  and  exercise 
the  exclusive  management  and  control  of  the  same;  and  the 
right  of  the  said  Trustees  to  manage,  control  and  administer  the 
said  trust  estate  shall  be  absolute  and  unconditional  and  free 
from  the  control  or  management  of  the  certificate  holders ;  make 
and  perform  contracts  of  every  kind  with  any  person,  firm,  as- 
sociation, or  corporation,  persons,  municipalities,  bodies  politic, 
county,  or  state,  government,  colony  or  dependency  thereof,  and 
without  limit  as  to  amount,  to  draw,  make,  accept,  endorse, 
discount,  execute  and  issue  promissory  notes,  scrip,  drafts,  bills 
of  exchange,  warranted  bonds,  debentures,  and  other  negotiable 


7o8 


Trusts  for  Business  Purposes. 


and  transferable  instruments  and  evidences  of  indebtedness 
whether  secured  by  mortgage  or  otherwise,  so  far  as  may  be 
permitted  by  any  custom  or  laws,  state  or  federal ;  have  offices, 
conduct  the  business  and  promote  the  objects  hereof,  in  any  and 
all  the  States,  and  District  of  Columbia,  the  territories  and  col- 
onies of  the  United  States,  and  in  foreign  coimtries,  without 
restriction  as  to  place,  time  or  amount;  adopt  by-laws;  hold 
official  trustees'  meetings;  conduct  the  business  of  producing, 
collective  buying  and  distributing  of  the  trust  estate  in  a  co- 
operative manner  and  to  the  end  that  the  producers  and  con- 
sumers who  shall  be  holders  of  the  beneficial  interests  of  the 
trust  estate  shall  receive  all  the  net  profits  thereof ;  meet  all 
competition  of  producers  and  distributors  in  any  branch  of 
production,  commercial  or  financial  activity  whatsoever,  in  any 
manner  which  may  not  be  unlawful,  to  the  end  that  commodi- 
ties shall  flow  freely  from  the  producer  to  the  consumer  with- 
out undue  or  unreasonable  trade  restrictions  or  monopoly,  but 
by  the  economic  law  of  supply  and  demand;  combine  on  the 
basis  of  co-operation  by  territorial,  political  or  occupational 
subdivision,  with  any  other  common  law  trust  which  is  con- 
ducted on  the  co-operative  plan  hereby  presented ;  eradicate  any 
and  all  of  the  evils  mentioned  in  the  preambles  hereof ;  assist 
the  nation  in  peace  or  war  by  the  contribution  of  organization 
talent,  men,  money  or  material ;  discountenance  and  oppose  for- 
eign control  of  American  Newspapers  or  other  means  of  pub- 
licit}'  or  education;  refrain  from  amalgamating  co-operatively 
or  otherwise  with  any  society  or  combination  for  foreign  propa- 
ganda having  the  design  or  effect  to  deceive  our  people;  deal 
with  foreigners  in  tangible  articles  of  trade  only  and  without 
regard  to  race  or  creed  but  at  arms  length;  appoint  trustees: 
increase  the  number  of  trustees  hereof  in  multiples  of  three  or 
thereafter  reduce  them  by  like  proportion;  resign  their  trust; 


Appendix.  7^9 

appoint  and  nominate  their  successors  in  trust;  which  success- 
ors in  any  degree  removed  may  in  like  manner  appoint  his  suc- 
cessor; keep  res^ular  minutes  of  trustees'  meetings  and  do  any 
or  all  of  the  things  herein  set  forth  to  the  same  extent  as 
natural  persons  might  or  could  do,  and  in  any  part  of  the 
world,  as  principals,  agents,  contractors,  trustees,  or  otherwise, 
and  either  alone  or  in  company  with  others.         i 

Specific  Powers. 

46.  All  acts  to  be  done  by  the  Trustees,  including  the  aliena- 
tion or  encumbering  of  real  estate  may  be  performed  by  the 
said  Trustees,  namely,  Harrison  Parker,  Viggo  E.  Bird  and 
John  Coe,  or  their  successors  in  any  degree  removed,  who  are 
hereby  made  Trustees  when  duly  nominated  and  confirmed  as 
herein  elsewhere  provided.  All  parol  contracts  when  in  writ- 
ing or  partly  in  writing  may  be  signed  by  any  two  of  said 
Trustees.  Any  verbal  contract  made  in  the  ordinary  course  of 
the  trust  business  by  any  one  of  said  trustees  shall  be  good  and 
sufficient  to  bind  the  trust  estate. 

47.  Any  Trustee  may  acquire,  own  and  dispose  of  benefi- 
cial interests  in  this  trust  to  the  same  extent  as  if  he  were  not 
a  Trustee  hereof ;  they  may  also  buy,  own  and  dispose  of  such 
interests  as  trustees  on  behalf  of  the  trust  to  any  number  and 
reissue  the  same. 

48.  The  Trustees  are  authorized  to  employ  all  necessary  or 
proper  agents,  servants,  brokers,  attorneys,  employees  or  coun- 
sel, to  carry  into  effect  the  purpose  of  the  trust  herein  created, 
and  to  protect  and  preserve  the  same,  and  to  provide  and  pay 
out  of  said  Trust  Estate  the  compensation,  fees,  commissions 
or  expenses  incurred  in  the  management  thereof.  To  contract 
for  and  on  behalf  of  said  trust  estate,  and  to  bind  the  same  and 


7IO 


Trusts  i^or  Busini;ss  Purposes. 


its  property  to  the  performance  of  such  contracts;  to  borrow 
money  on  behalf  of  such  trust  estate  on  such  terms  and  con- 
ditions as  said  trustees  shall  deem  best,  and  to  bind  said  estate 
and  its  assets  to  the  payment  of  such  indebtedness  and  to  pledge 
and  incumber  any  property  of  said  estate,  whether  real,  personal 
or  mixed,  for  the  security  of  the  indebtedness  so  incurred,  un- 
der such  terms  and  conditions  as  to  the  Trustees  may  seem  best, 
and  to  agree  upon,  approve  and  fix,  execute  and  deliver  and 
perform  in  the  name  and  on  behalf  of  the  said  trust  estate,  any 
deed,  pledge,  mortgage,  bond,  note,  endorsement  or  guarantee, 
trust  deed,  simple  contract  or  any  other  instrument  which  may 
be  necessary  or  proper  to  carry  out  the  terms  of  this  trust.  But 
neither  the  said  Trustees  nor  the  said  certificate  holders  nor 
any  of  them  shall  be  in  any  mianner  personally  liable  by  virtue 
of  any  contract,  note,  scrip,  bond,  deed  of  trust,  mortgage  or 
other  instrument,  executed  under  the  terms  of  this  paragraph, 
but  the  same  shall  fully  bind  the  property  of  the  said  trust  es- 
tate for  the  performance  thereof.  The  said  Trustees  are  here- 
by authorized  to  do,  or  cause  to  be  done  in  any  lawful  manner, 
all  the  things  which  are  incidental,  necessary  or  proper  to  carry 
fullv  into  effect  all  of  the  purposes  herein  enumerated  or  pow- 
ers hereby  conferred ;  the  general  authority  given  being  in- 
tended to  control  and  make  fully  effective  the  power  and  au- 
thority of  the  Trustees  under  this  instrument,  notwithstanding 
the  specific  enumeration  and  description  thereof  herein. 

49.  The  Trustees  shall,  in  their  own  names,  as  Trustees  of 
said  estate  doing  business  as  the  Co-operators  of  America, 
bring  any  suit  or  action  which  in  their  judgment  shall  be  neces- 
sary or  proper  to  protect  this  estate  or  to  enforce  any  contract 
made  for  the  benefit  hereof,  and  to  defend  in  their  discretion 
any  suit  or  action  against  this  estate  or  against  the  Trustees 
hereof,  or  against  any  employe  or  any  holder  of  beneficial  inter- 


Appe;ndix.  711 

ests  herein,  civil  or  criminal,  as  may  heretofore  or  may  here- 
after be  instituted.  The  said  Trustees  are  expressly  authorized 
to  bring  or  defend  such  suit  in  their  discretion  or  to  compromise 
and  settle  any  suit,  claim  or  controversy  in  which  tlie  said  es- 
tate is  interested,  as  to  them  may  seem  best,  and  to-  discharge  the 
same  out  of  said  estate  and  its  assets;  and  they  are  specially 
authorized  to  pay  or  transfer  out  of  this  estate  and  its  assets, 
all  sums  of  money  or  property  necessary  to  discharge  any  judg- 
ment against  them  in  their  capacity  as  Trustees,  together  v^itli 
all  court  costs,  or  other  costs,  including  counsel  and  attorneys' 
fees  and  also  to  pay  out  of  this  estate  or  its  assets,  such  sums 
of  money,  or  transfer  or  appropriate  property  thereof,  for  the 
purpose  of  settling,  compromising,  or  adjusting  any  such  claim 
or  controversy,  together  with  any  such  costs  and  expenses  con- 
nected therewith,  and  all  of  such  expenditures  shall  be  treated 
as  exiienses  of  executing  this  trust. 

50.  All  expense  incurred  by  these  Trustees  in  carrying  out 
the  terms  hereof,  whether  heretofore  contracted  or  now  exist- 
ing, as  well  as  all  liabilities  incurred  by  them  in  the  execution 
of  this  trust,  whether  arising  from  contract  or  tort,  shall  be 
considered  as  expenses  of  executing  this  trust,  which  shall  first 
be  paid  out  of  the  assets  and  properties  hereof,  and  which  shall 
be  a  first  and  prior  lien  against  the  said  estate  and  property,  su- 
perior to  all  others. 

Organizers. 

51.  The  Trustees  shall  provide  a  corps  of  organizers  whose 
duty  it  shall  be  to  guide  and  aid  the  producers  or  consumers  in 
the  several  localities  of  sufficient  number  to  justify  the  trust  in 
the  installation  of  co-operative  manufactories,  retail  stores,  and 
other  enterprises  and  to  receive  a  sufficient  amount  per  capita 
to  cover  the  outlay  in  that  behalf  and  to  conduct  the  general 


712 


Trusts  for  Business  Purposes. 


trust  enterprise  and  to  evidence  such  contributions  by  the  issu- 
ance of  certificates  of  beneficial  interests  in  the  trust  estate; 
employ  persons  who  shall  contribute  to  the  trust  and  take  bene- 
ficial interests  and  who  shall  be  trained  and  skilled  in  producing, 
buying  or  selling  the  products  of  persons  who  shall  be  minded 
to  contribute  to  the  trust  estate  and  take  beneficial  interests 
therein  and  instruct  such  producers  in  the  production,  prepara- 
tion,  manufacture,   sorting,   classifying,   packing  and  shipping 
thereof  so  as  to  pass  inspection  at  destination  and  prompt  pay- 
ment therefor  without  loss  to  the  producer ;  train  and  appoint 
persons  to  install  and  manage  neighborhood  retail  stores  and  in 
the  several  lines  of  trade,  manufacture,  art,  profession,  occupa- 
tion, invention  or  production;  and  in  conducting  of  department 
stores  and  country  general  stores ;  wholesale  stores ;  warehous- 
ing, cold  storage  and  transportation;  maintain  a  publicity  de- 
partment for  the  education  of  the  public  in  the  benefits  of  co- 
operation; and  to  perform  the  duties  in  the  said  several  Hues  of 
business  when  the  same  shall  be  acquired  by  the  trust;  and  in 
general  to  oversee  the  statistical,  fiscal  and  financial  affairs  of 
the  trust  estate. 


Advisory  Trustees. 

52.  The  Trustees  may  appoint  as  advisory  trustees  such  per- 
sons as  may  volunteer  and  as  the  trustees  may  deem  fit  for  such 
position,  without  compensation  except  as  they  may  be  actively 
employed  in'  the  business  of  the  trust.  The  persons  so  ap- 
pointed shall  be  of  pronounced  favor  toward  the  co-operative 
plan  hereof  and  may  severally  acquaint  themselves  with  the 
executive  duties  of  some  branch  of  the  business  into  which  the 
trust  may  be  divided  and  classified  or  in  the  general  executive 
management  of  the  trust.  Such  advisory  trustees  may  attend 
meetings  of  the  trustees  when  invited  thereto  but  shall  not  be 


Appendix.  713 

entitled  to  a  vote  nor  to  any  executive  powers  nor  to  partake  in 
the  title  to  the  property  of  the  trust  estate.  When  in  the  opinion 
of  the  executive  trutsees  any  such  advisory  trustees  are  com- 
petent they  may  be  nominated  and  appointed  as  trustees  and 
successors  to  the  trustees  as  herein  elsewhere  provided  for. 

DELKGATION. 

53.  The  Trustees  or  their  successors  hereby  are  vested  with 
power  to  appoint  any  individual  or  corporation  as  agent  or  as 
trustee  to  perform  the  trust  hereby  created,  whether  in  delega- 
tion of  the  powers  hereby  created  or  required  to  be  performed 
or  in  the  exercise  of  the  powers  of  such  appointee. 

Whenever  in  this  trust  deed  the  trustees  are  referred  to  ex- 
pressly or  by  implication  the  meaning  and  intent  thereof  shall 
include  any  and  all  appointees,  and  be  subject  to  the  rights, 
benefits  and  obligations  hereof. 


'tj*^ 


Subsidiary  Trusts. 

54.  The  Trustees  may  classify  the  several  lines  of  the 
Trust's  business  and  organize  the  same  severally  so  as  to  secure 
co-operation  between  them  by  character  of  business,  trade  or 
occupation,  or  by  locality  or  territorially,  as  by  experience  may 
to  them  seem  most  desirable ;  train  or  procure  persons  of  expert 
talent  in  each  of  the  several  classifications  or  lines ;  create,  settle 
and  declare  a  distinct,  self-sustaining  and  co-operative  subsidi- 
ary trust,  of  the  general  tenor  hereof,  of  each  of  the  several 
lines  and  classifications,  the  same  to  be  divided  into  aliquot 
parts  for  the  issue  of  Beneficial  Interests  thereof  to  be  depos- 
ited with  these  trustees,  subject  to  their  right  to  sell  the  same 
to  the  holders  of  interests  in  this  trust  not  exceeding  twenty 
subsidiary  interests  to  any  one  person,  and  providing  that  per- 


714 


Trusts  for  Business  Purposes. 


sons  dealing  with  such  subsidiary  trustee  shall  look  only  to  the 
property  of  the  subsidiary  trust  and  saving  this  trust  and  the 
trustees  and  cestuis  que  trust  harmless  therefrom. 

55.  It  is  expressly  declared  that  the  trustees  may  acquire  in 
whole  or  in  part  the  capital  stock  of  any  corporation  for  the 
purpose  of  adding  the  enterprise  co-operatively  to  the  trust  es- 
tate ;  and  in  case  a  subsidiary  trust  shall  be  formed  of  such  cor- 
porate enterprise  the  trustee  may  give  the  beneficial  interests  of 
such  subsidiary  trust  in  payment  therefor.  Provided  however 
that  in  lieu  of  buying  the  capital  stock  of  any  corporation  the 
trustees,  in  case  any  onerous  conditions  may  otherwise  and  un- 
foreseen be  attendant  thereon,  may  buy  all  the  property,  real, 
personal  and  mixed  and  the  stock-in-trade,  business  and  good 
will  of  such  corporation,  subject  to  or  free  of  the  debts  and 
liens  thereon  as  may  be  agreed  upon  and  in  payment  thereof 
may  give  the  beneficial  interests  of  any  subsidiary  trust  into 
which  the  same  may  be  organized. 

It  is  further  expressly  declared  that  after  such  purchase,  for 
said  purpose  or  any  formation  of  a  subsidiary  trust  the  sub- 
sidiary trust  interests  shall  not  be  sold  unless  as  a  condition 
precedent  all  the  purchasers  of  such  subsidiary  trust  interests 
shall  be  holders  of  beneficial  interests  of  this  trust  estate;  pro- 
vided that  in  the  event  of  the  formation  of  a  subsidiary  trust 
of  corporate  enterprise  or  purcliase  of  the  assets  thereof  all  the 
subsidiary  trust  interests  may  be  given  in  purchase  thereof  or 
in  conversion  for  corporate  stock  in  such  enterprise. 

56.  In  case  the  trustees  should  decide  to  exercise  their 
power  to  acquire  or  to  declare  a  subsidiary  trust  of  the  property, 
real,  personal  or  mixed,  and  the  business  and  good  will  of  any 
corporation  then  the  holders  of  the  corporate  stock  thereof 
who  may  be  cestuis  que  trust  herein  shall  consent  or  be  taken  to 
consent  thereto  and  to  convert  their  corporate  stock  into  benefi- 


Appendix.  7i5 

cial  interests  into  which  the  subsidiary  trust  assets  shall  be 
divided  as  may  be  determined  by  the  trustees  at  the  time  they 
shall  create  such  subsidiary  trust. 

Compe;nsation, 

57.  The  Trustees,  for  performing  their  official  duties  which 
shall  consist  exclusively  of  attending  trustees'  meetings,  as 
compensation  and  fees,  shall  be  entitled  to  charge  and  deduct  an 
amount  not  exceeding  4>4%  of  the  net  profits  provided  for 
the  trustees  under  the  Articles  of  Trust,  Exhibits  A  and  F,  and 
in  addition  to  such  compensation  they  severally  for  any  active 
service  they  severally  may  perform  in  the  business  of  the  trust 
shall  be  entitled  to  such  reasonable  compensation  as,  for  such 
services  as  they  may  perform,  is  usual  and  customary  for  like 
service,  in  case  they  necessarily  devote  their  time  to  the  trust 
business. 

58.  The  Trustees  may  adopt  by-laws  for  the  holding  of 
stated  meetings  and  other  meetings  of  the  Trustees  to  be  held 
from  time  to  time  anywhere  in  the  United  States  upon  the  call 
of  the  Secretary ;  they  may  make,  adopt,  amend  or  repeal  such 
by-laws,  rules  and  regulations  not  inconsistent  with  the  terms 
of  this  instrument,  as  they  may  deem  necessary  for  the  con- 
duct of  their  business  or  for  the  government  of  themselves, 
their  agents  or  representatives ;  to  fix  the  compensation  of  any 
or  all  agents  or  employees  they  may  appoint,  and  are  likewise 
authorized  to  pay  themselves  such  compensation  for  their  active 
services  as  they  may  deem  reasonable. 

59.  The  Trustees  may  cause  to  be  kept  by  a  Secretary  ap- 
pointed by  them,  a  record  of  all  meetings  of  the  Trustees, 
which  record  shall  be  similar  in  character  and  of  the  same  effect 


7i6  Trusts  for  Business  Purposes. 

as  that  kept  in  case  of  corporation  directors,  and  so  far  as  stran- 
gers to  this  trust  are  concerned,  shall  be  conclusive  against  the 
Trustees  of  the  Acts  and  Doings  therein  stated. 

Nominations,  Qualifications,  Duties,  Removaes, 

Compensation. 

60.  Every  Trustee  or  successor  in  trust  shall  at  all  times 
keep  in  the  official  minutes  of  the  Trustees  his  nomination  in 
writing  signed  by  him,  of  some  person,  from  among  the  ad- 
visory trustees,  as  his  successor  in  trust.  The  successors  in 
trust  respectively  of  the  present  trustee  in  whatsoever  degree 
removed,  in  addition  to  an  earnest  zeal,  which  shall  be  mani- 
fested by  more  than  lip  service,  for  the  co-operative  principles 
and  plan  hereof,  shall  concern,  embody  and  perpetuate  three 
general  qualifications,  severally,  to-wit:  The  successor  of 
Harrison  M.  Parker  in  whatever  degree  removed  shall  be  experL 
in  financiering,  business  organizing  and  executive  qualities ;  the 
successor  of  Viggo  E.  Bird  in  whatever  degree  removed  shall 
be  generally  concerned  with  the  occupationally  organized  pub- 
lic; and  the  successor  of  John  Coe  in  whatever  degree  removed 
shall  be  generally  representative  of  the  enlightened  and  unorgan- 
ized public  and  having  to  do  with  educational  matter.  In  case 
the  trustees  increase  their  number  of  executive  trustees  in  mul- 
tiples of  three  as  herein  elsewhere  authorized,  such  increase 
shall  be  attributive  equally  to  said  three  general  qualifications 
or  to  some  specific  subdivision  thereof  respectively,  and  their 
successors  respectively,  in  whatever  degree  removed,  shall  have 
qualifications  and  concern  and  be  nominated  in  like  manner,  as 
aforesaid ; 

The  said  trustee  and  successor,  representative  of  said  expert 
qualities  and  concern  in  financiering  and  business  organization, 


Appendix.  717 

shall  be  and  continue  the  executive  head  of  the  trustees  and  any 
additional  trustee  allotted  to  such  division  of  qualification  shall 
have  concern  only  with  such  subdivision  thereof  as  the  execu- 
tive trustee  shall  direct  other  than  that  of  executive  he^d  of  the 
trustees.  The  executive  trustee  shall  at  all  times  have  the 
personal  custody  of  all  articles  of  trust  and  documents  apper- 
taining thereto. 

Any  active  duties  as  to  detail,  which  may  be  necessary  in  and 
about  said  general  divisions  and  subdivisions  other  than  attend- 
ance of  trustees  meetings  and  the  functions  of  the  executive 
trustee  or  other  purely  official  functions  may  be  performed  by 
experts  in  the  respective  particulars  for  compensation  as  di- 
rected by  the  respective  trustees ;  or  the  trustees  respectively  or 
any  of  them  may  at  their  option  devote  their  time  thereto  and 
be  entitled  to  a  reasonable  compensation  for  such  active  service 
over  and  above  the  amount  of  4/^%  of  profits  for  attending 
trustees'  meetings  and  performing  their  purely  official  functions. 

Persons  nominated  as  aforesaid,  unless  objected  to  in  writing 
on  the  ground  tliat  they  are  not  in  favor  of  the  co-operative 
business  methods  of  the  business  carried  on  by  the  trustees  and 
have  not  said  qualifications  shall  be  appointed  and  confirmed 
by  the  trustees  when  the  trustee  so  making  such  nomination 
shall  for  any  reason  cease  to  be  trustee.  Appointments,  resig- 
nations or  other  defections  of  trustees  shall  be  evidenced  by 
memorial  in  the  trustees  minutes  which  shall  be  sufficient  as  to 
real  estate  titled  and  other  trust  business. 

The  successor  in  trust  of  the  executive  trustee,  in  any  degree 
removed,  shall  be  executive  trustee  subject  to  removal  by  the 
board  of  trustees  for  embezzlement,  intentional  fraud,  gross  in- 
competency, gross  neglect,  gross  mismanagement  or  gross  dis- 
loyalty, to  the  co-operative  plan  or  business  hereof,  upon 
charges  in  writing  duly  filed  with  the  Secretary  of  the  Board  of 


7i8  Trusts  for  Business  Purposes. 

Trustees  and  upon  thirty  days'  notice  to  such  executive  trustee 
of  the  trial  and  due  and  lawful  proof  thereof  before  said  Board 
of  Trustees,  sitting  as  a  trial  commission ;  a  complete  record  of 
the  evidence  and  proceedings  of  which  trial  and  conclusions 
of  fact  and  decision  of  the  commission  shall  be  preser\'cd.  No 
court  proceedings  shall  be  begun  against  such  executive  trustees 
before  such  trial  shall  have  been  had. 

Failure  to  Act. 

6i.  In  the  event  of  the  death,  resignation,  refusal  or  in- 
ability of  any  or  all  of  the  trustees  to  act  in  and  about  the  per- 
formance of  this  trust  or  by  reason  of  any  disability  or  disin- 
clination to  act  in  this  or  any  other  jurisdiction  the  trustees  or 
remaining  trustees  acting  collectively,  may  accept  any  resigna- 
tion, appoint  his  or  their  successors  whose  nomination  in  writ- 
ing each  trustee  and  successor  in  trust,  in  whatever  degree  re- 
moved, shall  constantly  have  and  maintain  in  the  records  of 
the  trust)  and  fill  any  vacancy;  in  any  which  events  any  suc- 
cessor so  nominated  and  appointed  hereby  is  made  successor  in 
trust,  who  by  virtue  of  such  appointment  shall  be  hereby  deemed 
to  be  ipso  facto  vested  with  all  the  title,  rights,  duties,  powers, 
obligations  and  emoluments  in  this  behalf  without  any  formal 
conveyance,  and  the  trustees  so  displaced  shall  thereupon  by 
virtue  hereof  ipso  facto  stand  divested  of  the  same  without  any 
formal  conveyance. 

62.  Any  such  successor  in  trust  shall  be  entitled  to  the 
immediate  possession  of  the  property  and  of  the  business, 
good  will,  franchises,  interests,  rights,  accounts,  commercial 
paper,  and  profits  and  of  the  records  and  books  of  account 
of  the  business  and  affairs  and  all  records  of  the  trust  estate 
and  of  the  management,  control  and  operation  of  the  same, 


Appendix.  719 

and  until  the  actual  delivery  thereof  to  the  successor  in  trust 
any  trustee  failing  so  to  act  shall  be  held  and  taken  to  be  ten- 
ant at  will  thereof  for  the  successor  in  trust  and  shall  deliver 
possession  thereof  on  demand  to  the  successor  in  trust  and  in 
case  of  refusal  of  the  outgoing  trustee  to  make  such  delivery, 
the  successor  in  trust  shall  take  possession  by  any  lawful 
means,  directly  or  indirectly ;  in  which  respect  a  memorial  in 
the  trustees  minutes  thereof  shall  be  conclusive  evidence  of  the 
taking  of  possession  and  the  rightfulness  thereof. 

Immunitie;s. 

63.  The  said  Trustees  shall  use  ordinary  and  reasonable 
diligence  in  the  performance  of  this  trust,  but  shall  not  be 
liable  to  the  certificate  holders  or  any  of  them  for  any  act, 
default,  failure  or  negligence  in  or  connected  with  the  execution 
of  the  said  trust,  provided  the  same  shall  not  amount  to  and 
constitute  fraud,  embezzlement  or  wilful  breach  of  trust,  and 
they  shall  not  be  obliged  to  give  bond  to  secure  the  due  per- 
formance of  this  trust  by  them. 

64.  The  Trustees,  except  to  the  extent  of  the  property 
immediately  held  by  them,  nor  in  any  manner  whatsoever  as 
to  the  several  subsidiary  trusts,  shall  not  be  held  personally 
liable  for  any  debts  or  claims  against  the  trust  estate  or 
against  such  subsidiary  trust;  nor  shall  the  subsidiary  trus- 
tees be  held  personally  liable  for  any  claims  or  debts  against 
the  business  of  such  subsidiary  trust  estate  beyond  the  prop- 
erty immediately  in  the  hands  of  such  subsidiary  trustee  and 
all  contracts  of  the  trustees  or  subsidiary  trustees  respectively 
which  bear  the  legend  "TiiE  Party  Contracting  Hereby 
Agrees  to  Look  Solely  to  the  Property  of  the  Trustee 
AND  TO  Absolve  the  Trustee  and  Cestuis  Que  Trust  From 


720  Trusts  for  Business  Purposes. 

Personal  Liability"  shall  be  sufficient  notice  to  such  con- 
tracting party  of  the  limited  liability  hereby  provided  as  of  a 
trust  at  Common  Law. 

65.  By  the  failure  or  neglect  of  such  trustee  or  trustees 
to  so  declare  in  any  instrument,  contract  or  obligation  entered 
into  for  the  purpose  of  carrying  out  the  objects  of  this  trust, 
mentioned  in  any  paragraph  herein,  shall  not  be  construed  to 
render  said  Trustees  nor  any  of  them  individually  liable  thereon, 
but  the  same  shall  be  obligations  binding  upon  and  perform- 
able  only  out  of  the  assets  of  said  trust  estate. 

66.  The  Trustees,  nor  the  subsidiary  trustees,  shall  not  be 
liable  for  any  losses  of  property  or  investment  or  transaction 
due  to  any  act  or  omission  by  them  in  good  faith;  nor  in 
any  event  or  circumstance  shall  they  be  held  liable  for  the 
acts  or  omissions  of  each  other,  nor  for  the  acts  or  omissions 
of  any  servant,  agent  or  attorney  appointed  or  acting  for 
them. 

67.  The  holders  of  said  debentures  or  beneficial  interests 
shall  not  have  any  right  by  reason  of  error  or  mis  judgment 
in  the  management  of  the  trust  short  of  embezzlement  or 
actual  and  intentional  fraud  upon  the  beneficial  interest  or 
debenture  holders  to  commence  and  prosecute  any  sort  of 
action  against  the  trustees  or  any  of  them  or  against  the  prop- 
erty or  against  other  security  holders  before  the  dissolution  of 
this  trust,  and  then  only  in  the  event  that  the  trustees,  on 
written  notice  particularly  specifying  the  alleged  cause  as 
aforesaid,  arbitrarily  refuse  or  negligently  delay  for  the  space 
of  ninety  days  to  take  such  action  as  may  be  directed  in  writ- 
ing by  a  majority  of  said  holders,  but  the  trustees  shall  not 
in  any  event  be  obliged  to  defend  any  action  or  to  begin  any 
suit  or  action  on  the  demand  or  notice  of  the  said  holders  of 
interests  or  debentures  as  aforesaid  unless  they   f?rst  tender 


Appendix.  7^1 

to  the  trustees  such  reasonable  indemnity  for  attorneys'  and 
sohcitors'  fees  and  other  usual  liabilities  and  expenses  as  the 
trustees  in  their  reasonable  discretion  may  require,  for  the 
protection  of  the  trustees  and  the  interests  of  beneficial  inter- 
est or  debenture  holders. 

68.  In  case  any  trustee,  officer,  agent  or  attorney  or  owner 
of  beneficial  interests,  for  any  reason,  shall  be  held  to,  or  be 
under  any  personal  liability,  not  due  to  his  acts  in  bad  faith, 
then  such  person  shall  be  held  harmless  and  indemnified  out 
of  the  Trust  Estate  from  and  of  all  loss,  cost,  damage  or  ex- 
pense by  reason  of  such  liability,  and  such  liability  upon 
which  said  person  is  personally  liable,  as  aforesaid,  shall  be 
deemed  a  direct  claim  against  the  assets  of  the  trust  and 
such  person  paying  the  same  shall  be  and  become  subrogated 
to  all  of  the  rights  of  the  holder  of  said  claim  against  the 
assets  of  this  trust,  and  shall  be  deemed  a  creditor  thereof 
to  the  extent  of  such  claim  or  liability,  and  if,  at  any  time, 
the  income  from  the  Trust  Estate  shall  be  insufficient  to  pro- 
vide for  such  indemnity  and  to  satisfy  all  liabilities  of  and 
claims  upon  it,  then  the  trust  Estate  shall  be  applied  to  the 
payment  of  the  claims  against  it,  including  the  claims  for 
which  such  persons  are  liable,  pro  rata. 

69.  The  death  of  a  holder  of  a  certificate  of  beneficial  in- 
terests or  trustee  during  the  continuance  of  this  trust,  shall 
not  operate  to  terminate  the  trust,  nor  shall  it  entitle  the  rep- 
resentatives of  the  deceased  holder  to  an  accounting  or  to 
take  action  in  the  courts  or  elsewhere  against  the  trustees; 
but  the  executors,  administrators,  or  assigns  of  any  deceased 
holder  of  beneficial  interests  or  debenture,  shall  succeed  to 
the  rights  of  said  decedent  upon  the  surrender  of  the  certifi- 
cate and  the  issue  of  a  new  certificate  therefor. 

70.  This  trust  shall  not  be  terminated  or  the  administration 


722  Trusts  for  Business  Purposes. 

thereof  in  any  wise  interfered  with  or  suspended  by  the  death 
of  any  such  beneficiary  or  his  incapacity  for  any  reason,  or 
by  his  said  interest  or  interests  being  by  process  of  law  sub- 
jected to  the  payment  of  debts,  or  in  any  way  vested  in  any 
heir,  assign,  creditor,  or  purchaser,  of  the  said  beneficiary 
or  in  any  trustee,  assignee,  or  officer  of  any  court,  or  by  the 
same  in  any  manner  being  divested  out  of  the  beneficiary  and 
transferred  or  vested  in  any  other  person,  administrator,  ex- 
ecutor, trustee,  assignee  or  personal  representative.  But  any 
such  person  who  may,  in  any  such  manner  acquire  or  be- 
come vested  with  the  ownership  of  such  certificate,  shall 
thereupon  succeed  to  and  become  entitled  to  all  the  rights  and 
equities  of  the  beneficiary  therein  named,  and  to  the  beneficial 
interests  in  this  trust  estate,  upon  surrendering  the  original 
certificate  to  the  said  Trustees  with  such  proof  of  ownership 
as  may  be  reasonably  required  by  them,  and  the  issue  in  lieu 
thereof  of  a  new  certificate,  and  notwithstanding  said  change 
of  ow^nership  or  interest  in  any  such  certificate,  or  death  or 
insolvency  of  the  original  owner  thereof,  the  said  trust  estate 
shall  continue  and  remain  in  full  force  until  terminated  as 
herein  provided. 

71.  The  ownership  of  Certificates  of  beneficial  interests 
issued  at  any  time  by  the  trustees  hereunder,  shall  not  entitle 
such  owner  to  any  title  in  the  trust  property  whatever;  nor 
to  the  right  to  call  for  a  partition  or  division  of  the  same, 
nor  shall  such  ownership  entitle  the  holder  to  an  accounting 
nor  for  the  declaration  or  payment  of  dividends  unless  in  case 
of  a  specific  showing  of  intentional   fraud  or  embezzlement. 

72.  The  trustees  shall  have  no  power  to  bind  the  holders  of 
beneficial  interests  and  such  holders  and  their  assigns  and  all 
persons  or  corporations  extending  credit  to,  contracting  with, 
or  having  any  claim  against  the  trustees  or  the  trust  estate, 


Appendix.  723 

or  any  subsidiary  trust  for  the  payment  of  any  amount  claimed 
as  owing  under  such  contract  or  claim  or  for  the  payment 
of  any  debt,  damage,  judgment,  decree,  or  of  any  money 
that  may  otherwise  become  due  or  payable  to  them  from 
the  trustees  or  subsidiary  trustees,  so  that  neither  the 
trustees  or  subsidiary  trustees,  nor  the  holders  of  beneficial 
interest,  present  or  future,  shall  be  personally  liable  therefor. 

y^-     Neither  the  said  certificate  holders,  nor  any  of  them, 
nor  their  property  shall  be  liable  for  any  indebtedness  or  lia- 
bility created  by,  growing  out  of,  or  arising   from  the  exe- 
cution of  said  trust  estate,  whether  arising  from  contract  or 
tort  of  the  said  trustees,  their  servants,  agents  or  employees, 
in  the  administration  of  said  estate.     The  trustees,  personally, 
nor  either  of  them,  nor  their  private  property,  whether  real, 
personal  or   mixed,   shall  be   in   any   manner,   liable    for   any 
debt   or   liability   incurred  by   said   trustees,   or   any  of   them 
in    the    administration    or    management    of    the    said    estate, 
whether  arising  from  contract  or  tort  of  the  said  trustees  or 
any  of  them  or  their  agents,  servants,  or  employees  ;  and  neither 
said  trustees  nor  any  of  them  shall   ever  be  held  personally 
liable  for  any  damage  or  injury  to  person  or  property  caused 
by  or  arising  from,  incident  to,  or  growing  out  of  the  exe- 
cutions of   said   trust;   nor  shall  they  be   liable   for  the   acts 
or  omissions  of  each  other.     That  the  assets  of  the  said  trust 
estate    only,    shall    be    liable    for    any    indebtedness,    liability, 
wrong,  injury,  or  tort  incurred,  arising  or  growing  out  of  the 
administration  of  the  said  trust  estate  by  the  said  trustees  or 
any  of  them  or  for  any  act  or  negligence  or  default  of  their 
servants,  agents,   or   employees  in  the   administration  of  this 
estate. 

74.     The  name  in  which  a  certificate  or  beneficial  interest, 
or  debenture  interest,  stand  on  the  books  of  the  trustees,  shall 


724 


Trusts  for  Business  Purposes. 


be  considered  by  the  trustees  conclusive  evidence  of  owner- 
ship, and  they  shall  not  be  required  upon  transferring  such 
certificate,  or  paying  dividends  on  such  interests,  or  distribut- 
ing assets  upon  the  termination  of  the  trust,  or  at  any  other 
time,  to  inquire  in  any  way  into  the  identity  or  relations  be- 
tween assignor  and  assigns,  pledgors  or  pledgees,  trustees  and 
beneficiary,  guardian  and  ward,  or  in  any  other  similar  rela- 
tion, and  shall  have  the  right  to  conclusively  presume  without 
inquiry,  that  the  holder  of  any  such  certificate  as  shown  by 
their  books  is  the  real  and  true  and  unconditional  owner 
thereof. 

75.  So  far  as  strangers  to  this  trust  are  concerned,  a  reso- 
lution of  the  Trustees  authorizing  a  particular  act  to  be  done 
shall  be  conclusive  evidence  in  favor  of  such  strangers  that 
such  act  is  within  the  powers  of  said  Trustees,  and  no  pur- 
chaser from  the  Trustees  or  one  loaning  money  to  the  trustees 
shall  be  bound  to  see  to  the  application  of  the  purchase  money 
or  loaned  money  or  other  consideration  paid  or  delivered  by 
or  for  said  purchaser  or  lender  to  or  for  said  Trustees. 

Reorganization. 


76.  If  for  any  cause,  whether  competitive,  economic,  po- 
litical, legal  or  official  the  trustees  or  any  of  them,  or  any 
successor  in  trust,  should  be  attacked  or  molested  in  the  man- 
agement or  right  to  carry  out  and  perform  this  trust,  then 
the  title  and  the  right  of  any  such  trustee  so  attacked  to  the 
possession  of  this  trust  estate  shall  ipso  facto  be  divested  and 
be  vested  in  the  successor  of  such  trustee  and  if  thereby  or 
for  any  other  cause  the  trustees  should  deem  themselves  in- 
secure and  unsafe  in  their  protection  of  the  rights  of  the  said 
cestui   que    trustent   then   the   trustees   at   their   election   and 


Appendix.  7^5 

option  may  surrender  to  their   successors  the  possession  of 
said  property,  business  and  assets  of  the  trust  estate  without 
filing  any  bill  in  equity  in  this  behalf,  and  such  successors  by 
means   of   the   present  corporate  or  by   other  agencies   may 
manage  and  conduct  the  business  and  affairs  of  said  trust  as 
a  going  concern  for  the  protection  of  this  trust  and  in  accord- 
ance with  the  spirit  and  intent  hereof  and  for  the  equal  or  pro 
rata  benefit  of  the  holders  of  beneficial  interests  and  debentures 
in  parity  or  priority  as  such  interests  may  appear;  in  which 
event  the  trustees  so  attacked  or  molested  ipsi  facto  shall  be 
divested  of  all  right  to  retain  such  title  and  possession  and 
shall  surrender  and  deliver  the  same  on  demand  to  the  succes- 
sor in  trust;  in  any  of  which  events  the  successors  in  trust 
hereby  are  vested  with  the  power  to  reorganize  this  trust  in 
any  administrative  respect  whatsoever  by  amendment  of  these 
articles  of  trust  in  any  manner  or  extent  which  in  their  judg- 
ment will  be  conducive  to  the  best  interests  of  the  business, 
the  holders  of  beneficial  interests,  and  the  beneficial  debenture 
holders ;  provided  only  that  in  whatever   form  of  trust  said 
reorganization  may  be  efifected  the  substantive  rights  of  the 
cestui  que  trustent  to  the  ultimate  benefits  be  duly  conserved ; 
and  to  such  purpose  the  trustees  in  any  said  events  or  for  any 
other  reason  are  further  empowered  to  organize  a  corpora- 
tion or  corporations  with  power  to  do  said  business  on  the  co- 
operative plan  of  these  Articles  of  Trust,  if  State  or  Federal 
Legislation  shall  authorize  such  incorporation  by  statutes  which 
in  the  judgment  of  the  trustees  would  not  burden  the  business 
and  management  with  cumbersome  restrictions,  impracticable 
conditions  and  expensive   franchises   taxations   and  visitorial 
exactions  in  favor  of  the  political  or  governmental  treasury, 
preventive   or   prohibitive   of   co-operative  commercial   enter- 
prise and  membership  benefits  therein. 


726  Trusts  for  Business  Purposes. 

DiSSOEUTlON. 
Dividends  and  Distribution. 

']'].  The  trustees  from  time  to  time,  are  authorized  to  de- 
clare and  pay  dividends  or  participating  distributive  benefits 
out  of  the  income  or  proceeds  from  time  to  time  decided  by 
them  from  the  Trust  Estate,  to  the  intent  that  this  trust  estate 
shall  be  nonaccumulative  as  to  profits. 

78.  If,  on  the  20th  day  of  February,  A.  D.  1940,  the  trus- 
tees should  deem  it  for  the  best  interests  of  the  trust  and 
cestui  que  trustent  to  dissolve  the  trust,  they  shall  sell  the 
then  remaining  corpus  of  the  estate  in  such  time  and  manner, 
in  parcels  or  en  masse  or  as  a  going  concern,  and  upon  such 
terms  as  to  them  may  seem  proper  and  right  and  distribute 
the  proceeds  as  herein  provided;  but  if  in  the  judgment  of 
the  trustees  such  dissolution  would  be  a  needless  sacrifice  of 
the  property  and  a  destruction  of  good  will  they  shall  not 
be  obliged  to  dissolve  the  trust  at  the  time  above  mentioned 
if  they  shall  deem  it  for  the  best  interest  of  the  business 
and  of  the  cestuis  que  trust  to  continue  the  trust's  business ; 
but  on  said  date  if  then  there  should  remain  outstanding  any 
beneficial  interests  under  said  Articles,  Exhibit  A,  or  de- 
benture interests  under  said  trust  deed,  Exhibit  F,  of  which 
the  holders  or  any  of  them  should  require  payment,  the  trus- 
tees at  their  option,  without  dissolving  the  trust,  shall  have 
the  right  to  make  payment  thereof  out  of  the  trust  estate  ac- 
cording to  their  priorities  to  the  extent  of  the  value  of  the 
Beneficial  interests  issued  under  the  articles  of  trust,  Exhibit 
A,  which  shall  not  have  been  converted  and  to  the  extent  of 
the  debenture  interests  issued  under  the  trust  deed,  Exhibit 
F,  and  remaining  unconverted  as  determined  by  the  usual  and 
current  value  thereof,  in  the  usual  way  by  the  trustees,  and 


Appexdix.  727 

which  amounts  shall  be  held  and  taken  as  and  for  the  value 
and  share  in  the  proceeds  of  sale  of  the  estate  as  upon  dissolu- 
tion and  liquidation  and  paid  out  of  the  corpus  of  the  trust 
assets  or  the  trustees  may  borrow  money  on  the  mortgage 
security  of  the  trust  assets  to  pay  the  same;  and  the  interests 
so  paid  out  may  be  reissued  to  such  lender  or  to  other  per- 
sons who  may  contribute  to  the  corpus  of  the  trust  assets. 

79.  The  holders  of  the  beneficial  interests  hereby  created, 
shall,  in  addition  to  such  dividends,  as  the  trustees  may,  from 
time  to  time  declare  and  pay,  be  entitled  on  the  dissolution  of 
the  trust;  to  the  proceeds  of  sale  of  the  corpus  of  the  trust 
estate  in  proportion  with  the  par  value  of  the  said  beneficial 
interests  held  by  them  at  that  time,  and  according  to  the  pari- 
ties or  priorities  herein  provided  to  the  extent  the  priorities 
shall  not  be  waived  or  displaced,  which  sum  or  sums  the  trus- 
tees, by  their  acceptance  of  this  trust,  hereby  agree  as  trus- 
tees to  pay  on  dissolution  at  that  time. 

80.  Upon  the  dissolution  of  the  trust,  for  the  purpose 
of  winding  up  the  afifairs  hereof,  and  liquidating  the  assets 
of  the  trust,  the  persons  then  constituting  the  Trustees  shall 
proceed  to  wind  up  its  aflfairs,  liquidate  its  assets  and  dis- 
tribute the  excess  after  payment  of  the  debts,  among  the  hold- 
ers of  beneficial  interests  and  debentures  and  for  that  purpose 
shall  continue  in  office  until  such  duties  shall  have  been  fully 
performed. 

In  Witness  Whereof,  the  parties  have  hereunto  set  their 
hands  and  seals  in  token  of  the  creation,  declaration  and  ac- 
ceptance of  the  trust  hereby  created,  for  themselves  and  their 
successors,  assigns  and  appointees  at  the  place  and  on  the 
day  and  year  first  above  written. 

(SEAL) 

(SEAL) 


728  Trusts  for  Business  Purposes. 

(SEAL) 

Trustees    and    Settlers. 

( (SEAL) 

ACCEPTED         ( (SEAL) 

( (SEAL) 

Trustees. 


Appendix,  729 

THE  GUARANTY  &  ACCIDENT  LLOYDS. 

This  association  was  organized  for  the  purpose  of  conduct- 
ing an  insurance  business  in  the  State  of  Ohio.  It  was  held 
that  this  was  an  association,  exercising  a  franchise.  The 
case  is  reported  in  51  Ohio  State  163,  37  N.  B.  828,  24  L. 
R.  A.  298.  Following  is  copy  of  the  instrument  under  which 
they  sought  to  do  an  insurance  business  in  Ohio: 

"The  undersigned  being  desirous  of  entering  into  the  busi- 
ness of  individual  guarantee  and  accident  insurance : 

"ist — Do  each  individually  agree  to  deposit  with  an  ad- 
visory committee  to  be  appointed  by  the  undersigned  as  here- 
inafter provided,  the  sum  of  one  thousand  dollars. 

"2d — Such  sum  or  sums  so  subscribed  by  each  individual 
subscriber  shall  be  held  by  the  advisory  committee  for  the 
individual  account  of  each  subscriber,  together  with  all  earn- 
ings thereon,  as  a  fund  to  meet  any  loss  which  such  subscriber 
may  sustain  upon  any  policy  of  insurance  subscribed  by  him 
beyond  the  net  amount  of  premiums  earned  and  received  on 
said  policy. 

"3d — Such  advisory  committee  shall  consist  of  five  of  the 
subscribers  to  this  agreement,  or  such  further  subscribers  as 
may  hereafter  adopt  and  execute  this  agreement,  and  may 
be  selected  and  appointed  once  in  each  year  on  the  Wednesday 
succeeding  the  first  Monday  in  January,  at  an  annual  meet- 
ing of  the  subscribers.  An  annual  meeting  shall  be  called  by 
the  advisory  committee,  by  mailing  or  handing  to  each  sub- 
scriber a  notice  for  such  meeting  at  least  five  days  before 
the  time  fixed  therefor.  The  advisory  committee  to  act  until 
the  Wednesday  succeeding  the  first  Monday  of  January,  1891, 
shall  be  composed  of 

(I.)  (2.) 

(3.)  (4.) 

(5-) 


730  Trusts  for  Business  Purposes. 

"Such  advisory  committee  and  every  member  of  such  com- 
mittee shall  continue  to  act  as  such  until  a  new  member  or  a 
new  committee  shall  be  appointed. 

"All  questions  shall  be  determined  by  a  majority  of  such 
committee,  and  three  members  thereof  shall  constitute  a 
quorum.  Each  member  attending  a  meeting  shall  be  paid  $5 
in  gold  for  each  attendance.  Such  committee  shall  meet  at 
least  once  in  each  month;  and  oftener  if  they  deem  it  neces- 
sary. 

"4th — Such  committee  shall  have  the  custody  and  manage- 
ment of  the  subscription  fund  above  provided  for,  and  the 
general  charge  and  supervision  of  all  the  business  to  be 
done ;  shall  supervise  and  direct  the  attorneys  in  fact  who  may 
be  appointed  by  the  subscribers,  exact  and  receive  accounts 
from  such  attorneys  in  fact,  examine,  audit,  and  pass  upon 
the  same,  receive  from  said  attorneys  in  fact  and  receipt  for 
any  earnings  applicable  to  the  several  accounts  of  either  of 
the  undersigned,  and  make  such  use,  disposition,  and  invest- 
ment of  the  fund  and  earnings  as  they  shall  deem  most  ad- 
vantageous and  secure. 

"5th — If  any  member  of  such  committee  shall  cease  to  be 
an  insurer  under  the  terms  of  this  agreement,  he  shall  cease 
to  be  a  member  of  such  committee  and  the  remaining  mem- 
bers thereof  shall  select  from  among  the  other  subscribers  at 
the  time  being  some  person  to  fill  the  vacancy  thus  occasioned. 
Any  vacancy  in  the  committee  shall  be  filled  in  the  same  man- 
ner. 

"6th — The  business  management  of  the  insurance  to  be  ef- 
fective for  and  on  behalf  of  each  of  the  individual  subscrib- 
ers hereto  shall  be  in  charge  of  Aaron  H.  Rathbone,  Frederick 
W.  Satterlee,  Cleveland  D.  Fisher,  and  John  G.  Dorrance, 
as  attorneys  in  fact  of  each  subscriber  hereto;  such  business 


Appe;ndix.  731 

shall  be  carried  on  at  an  office  to  be  known  as  the  office  of  the 
Guarantee  and  Accident  Lloyds ;  each  subscriber  shall  execute 
and  deliver  to  them  a  power  of  attorney,  in  form  and  effect 
to  be  approved  by  the  advisory  committee,  and  by  Alessrs. 
Coudert  Brothers,  counselors  at  law,  giving  to  said  attorneys 
the  necessary  power  for  the  purpose  indicated.  The  powers 
thus  conferred  on  said  attorneys  shall  be  subject  to  and  shall 
be  exercised  under  the  direction,  supervision,  and  control  of 
the  advisory  committee  above  referred  to,  and  all  policies 
or  other  instruments  binding  the  subscribers  must  be  signed 
by  at  least  two  of  said  attorneys.  The  compensation  of  said 
attorneys  jointly  shall  be  a  commission  of  ten  per  cent  on  the 
amount  of  the  premiums  received  in  each  year ;  in  considera- 
tion of  which  the  said  attorneys  agree  to  defray  all  charges 
of  office  rent,  salaries,  stationery,  advertising  and  all  other 
expenses  incident  to  the  proper  care  and  prosecution  of  the 
business,  except  agent's  and  broker's  commissions,  losses, 
legal  expenses,  taxes  and  the  pay  of  inspectors  employed  un- 
der the  direction  of  the  advisory  committee.  Such  attorneys 
shall  be  entitled  as  further  compensation  for  their  services, 
to  twenty-five  per  cent  of  the  net  profits  of  each  year's  busi- 
ness as  found  and  determined  by  the  advisory  committee. 
Such  profits  may  be  determined  and  paid  over  quarterly. 

"7th — Such  attorneys  shall  at  all  times,  wdien  so  required, 
furnish  to  the  advisory  committee  full  statements  of  all  in- 
surance, expenses  and  premiums,  whether  due  or  collected, 
and  every  member  of  the  committee  shall  at  all  times  have 
access  to  all  the  books  and  papers  of  the  attorneys.  The 
attorneys  shall  keep  separate  accounts  for  each  of  the  sub- 
scribers to  this  agreement,  and  each  subscriber  shall  at  all 
times  have  access  to  his  individual  account. 

"8th — -The  advisory  committee  shall  cause  to  be  made  up 


'J2,'2  Trusts  for  Business  Purposes. 

on  the  31st  day  of  December  in  each  year  all  the  accounts  of 
the  several  subscribers  hereto.  If  there  should  be  any  balance 
to  the  credit  of  the  several  subscribers  over  and  above  the 
amount  of  each  subscription,  the  advisory  committee  shall 
determine  how  much,  if  any  thereof,  it  is  advisable  to  pay  to 
each  subscriber;  and  no  part  thereof  shall  be  paid  to  or  with- 
drawn by  any  subscriber  hereto,  so  long  as  he  shall  remain  a 
party  to  this  agreement,  except  upon  the  order  or  direction 
of  the  advisory  committee.  Each  subscriber  shall,  however, 
be  entitled  to  receive  from  such  advisory  committee  at  the 
end  of  each  calendar  year  a  certificate  showing  the  amount  to 
his  credit  at  the  end  of  such  year.  If  account  of  any  sub- 
scriber hereto  shall  show  upon  such  annual  statement  that 
the  amount  to  his  credit  is  insufficient  to  cover  the  current 
liabilities  against  him,  the  advisory  committee  shall  have  the 
power  and  authority  to  call  upon  such  subscriber  for  the 
payment  of  such  an  amount  as  will  in  the  judgment  of  such 
committee  be  sufficient  to  meet  the  deficiency,  and  such  amount 
when  paid  shall  be  credited  to  each  individual  subscriber  in 
like  manner  with  his  original  deposit  and  if  not  paid  within 
three  months  from  the  date  of  such  call  such  subscriber  shall 
thereupon  cease  to  be  a  party  to  this  agreement  except  in  re- 
gard to  transactions  already  entered  into  on  his  behalf. 

"9th — In  case  any  of  the  subscribers  hereto  should  desire 
to  withdraw  from  this  agreement,  and  shall  give  thirty  days' 
notice  in  writing  of  such  desire  to  the  advisory  committee,  and 
in  case  any  of  such  subscribers  shall  become  insolvent  or 
embarrassed  in  business  or  in  case  of  any  other  reason,  it 
should  be  deemed  advisable  in  the  opinion  of  a  majority  of 
the  advisory  committee  that  any  subscriber  should  withdraw 
from  this  agreement,  the  attorneys  aforesaid  shall  upon  writ- 
ten notification  by  the   advisory  committee,  cease   to  act  as 


Appendix.  733 

the  attorneys  for  such  subscriber,  except  in  regard  to  trans- 
actions already  entered  into  on  his  behalf,  and  such  subscriber 
shall  thereupon  cease  to  be  a  party  to  this  agreement,  except 
in  regard  to  such  previous  transactions.  In  case  of  the  with- 
drawal of  any  subscribers  for  either  of  the  reasons  above 
stipulated,  and  in  case  of  the  death  of  any  subscriber,  his 
account  shall  not  be  closed  until  three  months  after  the  ex- 
piration of  all  risks  in  which  he  may  have  been  concerned 
as  such  subscriber,  and  all  sums  to  his  credit,  either  in  the 
hands  of  the  advisory  committee,  or  of  the  attorneys,  shall  be 
irrevocably  pledged  to  the  payment  of  any  losses  for  which 
he  may  be  or  become  liable,  and  of  any  amount  which  may  be 
due  or  unpaid  by  him  growing  out  of  the  insurance  business 
herein  contemplated ;  and  neither  such  subscriber  nor  his  as- 
signs or  legal  representatives  shall  have  the  right  to  withdraw 
any  part  of  such  sum  to  his  credit,  until  all  such  losses  or 
other  debts  are  fully  satisfied  and  discharged.  At  the  ex- 
piration of  all  such  risks  and  upon  payment  and  satisfaction 
of  such  other  indebtedness,  the  balance  remaining  to  the 
credit  of  such  subscriber  shall  be  paid  over  to  him  or  his  legal 
representatives  or  assigns. 

"loth — In  case,  however,  any  subscriber  who  duly  with- 
draws from  this  agreement,  or  the  legal  representatives  of 
any  deceased  subscriber,  should  procure  a  new  subscriber 
satisfactory  to  the  advisory  committee,  then,  upon  such  new 
subscriber  assuming,  in  writing,  all  the  liabilities  and  indebt- 
edness of  the  former  subscriber  under  this  agreement,  or 
arising  from  any  business  contemplated  therein,  and  duly 
executing  this  agreement,  the  former  subscriber,  or  his  legal 
representatives,  shall  be  released  and  discharged  from  all  re- 
sponsibility as  a  party  hereto. 

"nth — At  the  annual  meeting  of  the  subscribers  already 


734  Trusts  for  Business  Purposi;s. 

provided  for,  any  and  all  questions  arising  under  this  agree- 
ment, or  in  reference  to  the  business  herein  contemplated, 
may  be  called  up  and  disposed  of.  Special  meetings  may  be 
called  by  a  majority  of  the  advisory  committee,  or  by  any  ten 
subscribers,  in  the  manner  provided  for  annual  meetings.  The 
subscriber  may  waive  a  five  days'  notice,  and  accept  in  writing 
a  shorter  notice.  Matters  brought  before  any  meeting  shall 
be  determined  by  the  vote  of  a  majority  of  those  represented 
at  such  meeting,  either  in  person  or  by  proxy.  At  any  meet- 
ing, annual  or  special,  a  quorum  shall  consist  of  the  represen- 
tatives of  a  majority  of  the  subscribers.  No  change,  however, 
can  be  made  in  the  terms  of  this  agreement,  except  by  the 
vote  of  three- fourths  of  all  the  subscribers  hereto  at  a  meet- 
ing specially  called  for  the  purpose  by  notice  stating  the  exact 
terms  of  the  change  proposed. 

"i2th — ^All  claims  for  losses  shall  be  disposed  of  by  the 
attorneys  under  the  supervision  of  the  advisory  committee, 
and  shall  be  paid  out  of  the  funds  in  their  hands,  and  when 
these  are  insufficient,  then  out  of  the  funds  in  the  hands  of  the 
advisory  committee.  Any  suit  brought  upon  any  claim  aris- 
ing out  of  the  business  contemplated  by  this  agreement,  and 
any  questions  arising  as  to  any  legal  liability  upon  any  such 
claims,  shall  be  referred  to  Messrs.  Coudert  Brothers,  as  coun- 
sel, under  the  supervision  of  the  advisory  committee,  and 
such  committee,  with  the  advice  and  concurrence  of  said  coun- 
sel, shall  have  power  to  settle,  compromise,  or  contest  any 
such  suit  or  claim  as  to  them  shall  seem  expedient,  and  are 
authorized,  upon  the  advice  and  concurrence  of  said  counsel, 
to  stipulate  for  and  on  behalf  of  each  several  subscriber 
hereto,  that  such  subscriber  will  abide  by  the  event  of  any 
such  suit,  whether  at  the  time  of  such  stipulation  such  sub- 
scriber be  or  not  a  party  to  this  agreement. 


Appendix.  735 

"13th. — In  the  policies  issued  under  the  present  arrange- 
ment, neither  of  the  subscribers  shall  be  made  jointly  liable 
with  the  others,  nor  with  either  of  the  others,  but  each  sub- 
scriber shall  only  be  made  severally  and  separately  liable  to 
the  amount  authorized  by  him  individually  in  the  power  of 
attorney,  given  by  him  to  the  attorneys  above  mentioned. 
Nor  shall  any  joint  liability  be  created  on  behalf  of  the  sub- 
scribers hereto,  in  any  matter  arising  out  of  the  business  to 
be  carried  on  under  this  agreement,  but  only  a  several  liability 
on  behalf  of  each  individual  subscriber.  No  policy,  however, 
shall  be  issued  on  behalf  of  any  individual  subscriber  hereto, 
unless  each  of  the  individual  subscribers  insures  for  a  like 
amount  on  said  policy. 

"14th — All  receipts  or  earnings  of  the  business  contemplated 
by  this  agreement  shall  be  kept  by  the  attorneys  in  fact  in  a 
separate  bank  account,  in  their  name  as  such  attorneys,  and 
not  in  any  way  mingled  with  their  own  funds.  They  shall 
render  accounts  to  the  advisory  committee  at  least  once  in 
each  month,  or  oftener  if  required,  and  shall  make  returns 
and  payments  of  balances  to  such  advisory  committee  at 
least  once  in  every  three  months,  and  oftener  if  required  by 
the  said  committee. 

"15th — All  funds  in  the  hands  of  the  advisory  committee 
shall  be  kept  separately,  and  a  separate  bank  account  shall 
be  kept  by  the  committee  for  all  uninvested  funds,  which  bank 
account  shall  be  in  the  names  of  such  committee. 

Each  of  the  undersigned,  in  consideration  of  the  premises 
and  of  the  execution  of  this  agreement  by  the  others,  does 
hereby  severally  agree  for  himself,  individually,  to  and  with 
the  others,  and  with  each  of  them,  that  he  and  his  represen- 
tatives and  assigns,  will  faithfully  abide  by  and  carry  out  his 
obligations  and  covenants  hereunder. 


736  Trusts  for  Business  Purposes. 

"In  testimony  whereof,  each  of  the  subscribers  has  hereto 
set  his  hand  and  seal,  on  the  day  and  year  set  opposite  his 
name. 

"Each  member  of  the  association  also  executed  a  power 
of  attorney  in  the  form  following,  viz. : 

"Know  all  men  by  these  presents,  That  I  do  hereby  consti- 
tute Aaron  H.  Rathbone,  Frederick  W.  Satterlee,  Cleveland 
D.  Fisher,  and  John  D.  Dorrance,  my  attorneys,  in  fact,  for 
me  and  in  my  name,  place  and  stead  to  insure  individuals, 
firms,  or  corporations  against  all  lawful  risks  injuries,  losses, 
and  liabilities,  excepting  marine  losses,  losses  by  fire  and  death 
from  natural  causes,  upon  such  conditions  as  they  may  deem 
to  my  interest;  for  such  purpose  to  make  and  issue  all  bind- 
ing  contracts    and   policies   of    isurances ;   to   subscribe   such 
policies  in  my  name,  with  the  amount  insured  by  me  thereon, 
which  shall  in  no  case  exceed  the  sum  of  five  hundred  (500) 
dollars  on  any  one  risk,  unless  such  excess  shall  have  been 
provided  for  by  re-insurance;  to  change  or  modify  the  terms 
of  any  policy  so  issued;  to  annul  or  cancel  the  same;  in  their 
discretion  to  re-insure  any  and  all  such  risks  so  taken  and  in- 
sured in  such  manner  as  shall  be  deemed  by  them  most  ad- 
vantageous to  my  interests;  provided  always,  that  no  such 
insurance  or  policy  or  re-insurance  shall  be  made  in  my  name 
or  for  my  account  unless  a  like  insurance  policy  or  re-insur- 
ance on  the  same  risk  be  made  at  the  same  time  and  on  the 
same  terms,  for  and  in  the  name  of  each  and  every  other  per- 
son for  whom  they  shall  at  the  time  be  acting  as  attorneys 
under  power  similar  to  this,  severally  and  not  jointly,  for  an 
equal  amount,  as  provided  in  the  articles  of  agreement  en- 
tered into  by  me  with  various  other  persons  on  the 

day  of ,  189.  .,  of  which  agreement  copy  has  been 

furnished  to  said  attorneys. 


Appendix.  737 

"This  power  is  given,  and  the  exercise  of  all  faculties  there- 
under is  subject  to  the  control  and  direction  of  the  advisory 
committee  acting  under  the  provisions  of  the  articles  of  agree- 
ment hereinabove  referred  to,  and  the  said  attorneys  are  in- 
structed and  directed  to  turn  over  to  such  advisory  committee 
all  premiums,  notes,  moneys,  or  things  of  value  belonging 
to  me  which  shall  come  into  their  possession  in  the  premises 
at  least  once  in  every  three  months,  and  as  much  oftener  as 
they  may  be  thereto  required  by  said  advisory  committee. 

"To  demand,  collect,  sue  for,  receive  and  receipt  for  all 
premiums  which  may  at  any  time  become  due  to  me. 

"Also  to  receive  notices  and  proofs  of  loss  and  interest, 
and  all  other  notices  and  proofs  under  any  policy  issued  by 
virtue  hereof,  and  in  all  respects  to  manage  and  do  in  and 
about  such  insurance  and  all  notices  or  claims  thereunder,  as 
they  shall  deem  best  for  my  interests. 

"Also  to  adjust  and  pay  out  of  any  moneys  in  their  hands 
belonging  to  me  any  loss,  claim,  or  demand  that  may  arise 
from  or  under  any  policy  issued  in  my  name  under  this  power. 
And  in  case  of  suit  being  brought  against  me  on  any  such 
loss,  claim,  or  demand,  to  appear  for  me  and  in  my  name 
to  defend  or  compromise  such  suit.  Also,  with  the  advice 
and  concurrence  of  the  advisory  committee,  to  stipulate  in 
my  name  that  I  will  abide  by  the  event  of  any  suit  which 
may  be  brought  against  any  other  party  to  the  articles  of 
agreement  already  mentioned,  upon  any  policy  which  shall 
have  been  likewise  subscribed  in  my  name  by  virtue  hereof. 

"Also  to  do  and  perform  for  me  and  in  my  name  every 
other  act  and  thing,  in  relation  to  any  poHcy  made  by  virtue 
hereof,  as  fully  as  I  could  personally  do. 

"Provided  always,  that  my  said  attorneys  shall  in  no  case 
make  any  policy  of  insurance  by  virtue  of  these  presents,  by 


738 


Trusts  for  Business  Purposes. 


which  I  shall  be  made  to  insure  jointly  with  any  other  person 
or  which  shall  in  any  w^ay  make  me  liable  for  the  acts  of  any 
other  person  or  insurer,  or  which  shall  bind  or  affect  me 
otherwise  than  by  a  several  and  individual  liability  to  the 
amounts  insured  or  subscribed  by  me  individually  or  in  my 
name. 

"In  testimony  whereof  I  have  hereunto  set  my  hand  and  seal 

in  the  city  of  New  York,  on  the day  of , 

189. .. 

"Sealed  and  delivered  in  presence  of 


The  form  of  policy  used  by  the  association,  and  issued  to 
those  whom  it  insures,  is  as  follows: 


Ceassification  a. 

No $ 

Guarantee  and  Accident  Lloyds. 
New  York. 

Age Weekly  Indemnity  $ 

In  Consideration  of dollars  paid,  and  of  the 

warranties  and  agreements  contained  in  the  application  for  in- 
surance, which  application  is  made  a  part  of  this  contract, 
each  of  the  subscribers  hereto,  as  a  separate  underwriter,  does 
for  himself  and  not  one  for  the  other,  hereby 

Insure  (subject  to  the  conditions  hereon) 

of   

by  occupation  a 

from  12  o'clock  noon  of  the day  of 189.  . ,  to 

12  o'clock  noon  of  the day  of 189.  .,  and  for 

such  further  period  of  time  as  may  be  covered  by  duly  author- 
ized renewal  receipts  subject  to  the  conditions  and  provisions 
expressed  therein. 


Appendix.  739 

Against  Loss  of  Life,  Eye  or  Eyes,  Loss  (Separation)  of 
Limb  or  Limbs  at  or  above  the  wrist  or  ankle,  provided  such 
loss  occurs  within  ninety  days  of  the  happening  of  the  accident 
causing  the  same,  also  against  the  loss  of  time  while  immedi- 
ately, continuously  and  wholly  disabled  and  prevented  from 
transacting  any  and  ever}'  kind  of  business  pertaining  to  the 
occupation  above  stated,  not  to  exceed  sixty-five  consecutive 
weeks  (except  when  so  disabled  for  life),  provided  the  loss  for 
which  any  claim  is  made  is  not  caused  or  contributed  to  by  any 
form  of  disease,  but  is  caused  exclusively  by  bodily  injuries 
leaving  external  and  visible  marks  of  contusion  or  wounds  upon 
the  body,  effected  by  external,  violent,  and  accidental  means 
during  the  continuance  of  this  insurance,  in  the  following 
sums,  to-wit : 

1.  For  loss  of  life  as  aforesaid $5,000.00 

2.  For  loss  of  both  hands  as  aforesaid. .. .    5,000.00 

3.  For  loss  of  both  feet  as  aforesaid 5,000.00 

4.  For  loss  of  one  hand  and  one  foot  as 

aforesaid    5,000.00 

5.  For  loss  of  both  eyes  as  aforesaid 5,000.00 

6.  For  permanent  total  disability  for  life 

as  aforesaid 3,000.00 

7.  For  loss  of  the  right  foot  as  aforesaid.  .  2,500.00 

8.  For  loss  of  the  left  foot  as  aforesaid.  ,  2,500.00 

9.  For  loss  of  the  right  hand  as  aforesaid.  2.500.00 
10.  For  loss  of  the  left  hand  as  aforesaid.  .  1,500.00 
ir.     For  loss  of  one  eye  as  aforesaid....  650.00 

12.  For  loss  of  time  per  week,  as  aforesaid 

(in  lieu  of  all  other  benefits) 25.00 

13.  The  loss  in  subdivision  I  is  payable  to 

if  surviving,  if  not,  to  the  legal  representatives  of  the  assured. 
Other  loss  to  the  assured. 

14.  The  assured  shall  have  the  privilege  of  travelling  in 
any  of  the  civilized  portions  of  the  globe,  by  confining  himself 
to  the  usual  routes  and  the  ordinary  means  of  conveyance. 


740 


Trusts  for  Business  Purposes. 


15.  The  loss  of  one  or  both  eyes,  feet  or  hands,  or  failure 
duly  to  pay  any  premium,  will  immediately  terminate  this  in- 
surance. 

16.  Each  of  the  subscribers  hereto  shall  be  and  is  individu- 
ally liable  for  one-hundredth  part  of  the  amount  insured  here- 
under. 

17.  Affirmative  proofs  of  loss  and  proof  of  insurable  inter- 
est under  subdivisions  i,  2,  3,  4,  5,  7,  8,  9,  10  and  11,  shall  be 
furnished  to  the  attorneys  of  the  subscribers  within  four  months 
of  the  happening  of  the  accident  causing  the  same,  and  under 
subdivisions  6  and  12  within  one  month  after  termination  of 
total  disability,  and  no  proceeding  in  law  or  equity  shall  be 
brought  to  recover  payment  under  this  policy  unless  such  suit 
or  proceeding  shall  be  com.menced  within  six  months  of  the 
filing  of  such  affirmative  proofs  and  against  only  one  of  the 
underwriters  at  one  time.  A  final  decision  in  any  suit  so 
brought  shall  be  decisive  of  such  claim  against  each  of  the 
underwriters,  and  each  underwriter  hereto  waives  any  limita- 
tion as  to  costs,  and  agrees  to  abide,  by  the  event  of  any  such 
suit,  and  authorizes  the  attorneys  to  pay  the  assured  out  of  any 
funds  in  their  hands  the  amount  due  under  this  policy.  Each 
of  the  underwriters  hereby  authorizes  the  attorneys  to  receive 
and  admit  service  of  process  for  him  in  any  suit  brought  as 
aforesaid. 

18.  If  the  assured  shall  be  fatally  or  nonfatally  injured, 
while  temporarily  or  otherwise  exposed  to  a  hazard  pertaining 
to  an  occupation  or  employment  classed  by  the  subscribers  as 
more  hazardous  than  that  here  given,  the  liability  hereunder 
shall  be  only  for  such  amount  as  is  provided  for  the  class  in 
which  such  more  hazardous  occupation  or  exposure  is  rated, 
in  the  manual  of  the  Guarantee  and  Accident  Lloyds. 

19.  All  losses  under  this  policy  are  payable  at  the  Home 


Appendix.  741 

Office  in  New  York,  ninety  days  after  receipt  of  proofs  of  loss 
satisfactory  to  the  attorneys  of  the  subscribers. 

Each  of  the  present  subscribers  as  a  separate  underwriter 
binds  himself  severally  and  not  jointly  with  any  other  for  the 
true  performance  of  the  premises  for  the  amount  expressed  to 
be  insured  by  him. 

In  Witness  Whereof  the  subscribers,  as  separate  under- 
writers do  severally  subscribe  their  names  at  the  City  of  New 

York,  this day  of ,  189..." 

Here  follow  the  names  of  the  members : 

Signed  "by Attorneys." 

Conditions. 
Not  Waivable  by  Agents. 

"The  conditions  under  which  this  policy  is  issued  and  ac- 
cepted by  the  assured  are  as  follows : 

"This  insurance  shall  not  be  held  to  extend  to  or  cover  dis- 
appearances, nor  to  any  injuries  received  while  engaged  tempo- 
rarily or  otherwise  in  any  act  or  thing  pertaining  to  blasting, 
wrecking  or  to  the  manufacture,  transportation  or  handling  of 
gunpowder,  or  any  explosive  substance  or  article  in  any  way, 
shape  or  manner,  except  the  use  of  firearms  by  sportsmen,  nor 
while  riding  on  a  railroad  train  in  any  place  or  places  except 
those  provided  for  the  transportation  of  passengers,  or  while 
vra,lking  or  being  upon  any  bridge  or  road  bed  of  any  railway. 

"The  assured  suffering  a  loss  for  which  a  special  sum  is 
stated  herein,  shall  not  be  entitled  to  any  other  indemnity,  for 
the  same  injury,  and  the  total  amount  of  indemnity  hereunder 
in  any  one  year  (twelve  months)  shall  not  exceed  the  sum 
named  herein  as  death  indemnity. 

"In  the  event  of  an  accident  or  injury  for  which  or  from 


742  Trusts  for  Business  Purposes. 

which,  directly  or  indirectly,  any  claim  may  be  made  under  this 
policy,  notice  shall  be  given  in  writing  signed  by  the  assured, 
his  attending  physician,  or  beneficiary,  mailed  within  ten  days 
of  the  happening  of  such  accident,  and  addressed  to  the  Mana- 
ger of  the  Accident  Department  of  The  Guarantee  and  Accident 
Lloyds  at  New  York,  stating  the  full  particulars  as  to  when 
and  where  and  how  it  occurred,  and  the  occupation  of  the  as- 
sured at  the  time,  his  policy  number  and  his  address. 

"A  representative  of  the  subscribers  shall  be  allowed  to  ex- 
amine the  person  or  body  of  the  assured  in  reference  to  any 
injury  or  cause  of  death,  when  and  as  often  as  may  be  reason- 
ably required  in  their  behalf. 

"The  subscribers  or  their  attorneys  shall  have  a  right  to  ter- 
minate this  policy  and  insurance,  by  mailing  to  the  assured  at 
his  address  as  furnished,  a  notice  of  such  termination,  and  a 
check  or  draft  on  New  York  for  all  unearned  premiums  stand- 
ing on  the  books  of  the  Lloyds  to  his  credit. 

"This  insurance  shall  not  be  held  to  extend  to  or  cover  in- 
juries received,  whether  fatal  or  nonfatal,  that  are  caused 
wholly  or  in  part,'  directly  or  indirectly,  by  or  in  consequence  of 
disease ;  fighting,  scuffling,  lifting  or  over-exertion,  unnecessary 
exposure  to  danger  (voluntary  or  otherwise)  ;  war,  riot,  or  in 
consequence  of  violating  the  law,  by  inhalation  or  otherwise 
(voluntary  or  involuntary)  of  any  form  of  gas  or  gasses;  in- 
juries intentionally  inflicted;  injuries  received  while  under  the 
influence  of  intoxicating  drinks,  or  narcotics  or  in  consequence 
thereof;  sunstroke,  freezing,  suicide  (felonious  or  otherwise, 
sane,  or  insane)  ;  contact  with  any  poisonous  substance. 

"In  the  event  that  a  claim  shall  be  made  under  this  policy  for 
loss  of  one  hand  or  one  foot,  and  the  assured  shall  have  more 
than  one  other  policy  of  accident  insurance  covering  such  loss, 
the  liability  hereunder  shall  be  only  for  such  proportionate  part 


Appendix.  743 

of  the  amount  of  such  loss  of  hand  or  foot  named  herein  as  one 
poHcy  bears  to  the  total  number  of  policies  held  by  the  assured. 

"By  the  acceptance  of  this  policy  the  assured  absolutely 
agrees  and  consents  that  in  any  action,  proceeding  or  investiga- 
tion in  which  this  Lloyds  is  interested,  any  physician  who  has 
been  or  may  be  at  any  time  consulted  by  him  professionally, 
may  testify  under  oath,  before  any  court,  tribunal  or  officer, 
concerning  any  ailment,  disease,  injury  or  affliction,  bodily  or 
mental,  constitutional  or  otherwise,  that  he  is  or  has  been  or 
may  be  suffering  from. 

"Should  the  assured  engage  in  an  occupation  more  hazardous 
than  that  named  herein,  it  shall  operate  immediately  to  reduce 
the  indemnity  named  herein  to  that  provided  for  such  more 
hazardous  occupation  according  to  the  manual  of  the  Guaran- 
tee and  Accident  Lloyds  then  in  use,  with  the  same  effect  as  if 
the  policy  had  been  canceled  and  a  new  one  issued  accordingly, 
the  premiums  however  remaining  the  same. 
"Dividend  Bond  Notice. 

"This  policy  participates  in  the  benefits  of  the  dividend  bond 
class,  when  the  premiums  are  paid  annually  in  advance. 

"Notice. 

"In  case  of  injury  notice  must  be  given  immediately  to 

"W.  D.  Chase, 
"Guarantee   and  Accident   Lloyds." 


TABLE  OF  CASES. 

A. 

Page 

Abbey  v.  Chase,  6  Cush.   54 214 

Acme  Cement  P.  Co.  v.  Am.  C.  P.  Co.  Tex.  Civ  App.  167  S.  W. 

183     161 

Adams  v.  Adams,  86-89  U.  S.  Sup.  Ct.  504 170 

Adams  Express  Co.  v.  Schofield.  Ill  Ky.  833,  64  S.  W.  903.. 115, 117 

Adams  v.  Nelson,  1  Ohio  S.  &  C.  P.  Dec.  216 74 

Aiello  V.  Montecalfe,   21   R.  I.  496 126 

Ainsa  v.  Mercantile  Trust  Co.,  174  Cal.  504,  163  Pac.  898. .  .176, 195 

Alger  V.  Thacher,  19  Pick.  54,  31  Am.  Dec.  119 385 

Allgeyer  v.  Louisiana,  165  U.  S.  578,  41  L.  Ed.  832,  17  Sup.  Ct. 

Rep.    427    37 

Alvord  V.   Smith,  5  Pick.    (Mass.  22)    232 106,107,111 

American  Bonding  Co.  v.  Richardson,  214  Fed.  897 174,194 

American  Bonding  Co.  v.  State  Ind.,  40  App.  559,  82  N.  E.  548.  221 
American  Colonization  Soc.  v.  Lathrobe,  132  Md.  524,  104  Atl. 

120     311 

American  Steel  v.  Wire  Drawers,  90  Fed.  598,  20  R.  C.  L.  669 

Sec.    9    154,355 

Anderson  v.  Kemper,   116  Ky.   339,   76   S.  W.   122 225 

Anderson  v.  Phegley,  57  Ore.  172,  110  Pac.  975 170,180,185 

Anderson  v.  Stockdale,  62  Tex.  54 150 

Anderson  v.  Williams,   262   111.  308,   104  N.  E.  659 23 

Arnold  v.  Southern  Pine  Lumber  Co.,  Tex.  Civ  App.,  123  S.  W. 

1162     171, 191 

Ashley  v.  Holman,  44  S.  C.  145,  21  S.  E.  624 198 

Ashley  v.  Winkley,  209  Mass.  509,   95  N.  E.  932 192 

Association  v.  McAllister   (Mass.)   26  N.  E.  862 203 

Austin  V.   Cahill,  99  Tex.  172,  88  S.  W.   542 5,51,151 

Austin  V.  Wilcoxson,  149  Cal.  24,  84  Pac.  417 2 

Austin  V.  Young,  90  N.  J.  E.  47,  106  Atl.  395 5 

Aycock  V.  R.  R.  Co.,  89  N.  C.  321 84 

B. 

Babbitt    v.     Fidelity    Trust    Co.,    72    N.     .T.    E.    745,    66    Atl. 

1076     178,  182,  209 

Backus  V.  Crane,  87  N.  J.  E.  229,  100  Atl.  900 204 

Bacon  v.   Pomeroy,   104   Mass.    577 109 

Bailie  v.   Carolina  Interstate  Bldg.   &  Loan  Ass'n,   100  Ga.   20, 

28    S.    E.    274 82 

Bailey  Appeal  of    (Pa.)    5  Atl.   49 215 

(745) 


746  Tabl^  of  Cases. 

Baker   McGrew   Co.   v.   Union    S.    &   T.   Co.,    125   Ark.   146,    188 

S.    W.    802 251 

Baltimore    v.    United    R.    Co.,    108    Md.    71,    f59    Atl.    436,    10 

L.  R.  A.    (N.  S.)    1006 153 

Bank  of  Augusta  v.  Earle,  38  U.  S.  13,  Pet.  595  10  L.  Ed.  311..   393 

Bank  of  Watertown  v.  Watertown,  25  Wend.  686 326 

Barbour  v.  Weld,  201  Mass.  513,  87  N.  E.  909 225,  227 

Barlow  v.  Lee  Cong.   Society,   8  Allen  460 214 

Barnes  v.  Spencer,  79  Ore.  205,  153  Pac.  47 76 

Barroll  v.   Foreman,  88   Md.   188,   40  Atl.  883 174,183 

Bartlett  v.    Pickering,   113    Me.   96,   92    Atl.   1008 195 

Bay  Biscayne  Co.  v.  Bails,  73  Fla.  1120,  75  So.  860.  ..  .5,  22,  82,  223 
Beam  v.  Patterson  Safe  Deposit  &  Trust  Co.,  82  N.  J.  E.  518, 

91    Atl.    734 195 

Belding  v.  Archer,  131  N.  Car.  287,  42  S.  E.  800 226 

Berry  v.  Dunham,  202  Mass.  133,  88  N.  E.  904 74 

Berry  v.   Stigall,  125  Mo.  App.  264,  102   S.  W.  585 223 

Berthold  v.  Goldsmith,  24  How.  541,  16  L.  Ed.  762 340 

Bertholf  v.  O'Reilly,  74  N.  Y.  509,  30  Am.  Rep.  323 407 

Bessette  v.  People,  193  111.  334,  62  N.  E.  215 36 

Bigelow  V.  Cady,  171  111.  229,  48  N.  E.  974,  63  Am.  St.  230....     28 

Biggs  V.  Miller  (Tex.  Civ.  App.)   147  S.  W.  632 157 

Bingham  v.  Graham    (Tex.)    220  S.  W.  105 138,354 

Birmingham  Belt  R.  Co.  v.  Gerganous,  142  Ala.  238,  37  So.  929.   183 

Bliss  V.  Bliss,  20  Idaho  467,  119  Pac.  451 305 

Bobb  V.  Bobb,  89  Mo.  411,  4  S.  W.  511 192 

Bodwell  V.   Eastman,   106   Mass.   525 107 

Boehmer  v.  Silverstone,  95  Ore.  154.  186  Pac.  26.  .  .170,  185, 194,  205 

Bogard  v.  Planters'  Bank  &  Trust  Co.   (Ky.)   112  S.  W.  872 209 

Bohll  V.  Hasselbroch,  64  N.  J.  E.  334,  51  Atl.  508 80 

Bone  V.  Hayes,  154  Cal.  759,  99  Pac.  172 164,193 

Boothe  V.   Cheek,   253   Mo.   119,   161   S.  W.   791 166 

Bourquin  v.  Bourquin,  120  Ga.  115,  47  S.  E.  639 194 

Boston  &  Albany  Railroad  v.  Pearson,  128  Mass.  445 107 

Boston  Beer  Co.  v.  Massachusetts,  97  U.  S.  25.  24  L.  Ed.  989..   374 

Bowes  V.  Cannon,  50  Colo.  262,  116  Pac.  336 2 

Braceville   Coal  Co.  v.   People,  147   111.   66,   35  N.   E.   62,   22   L. 

R.    A.    340 3" 

Brackett  v.  Middlesex  Banking  Co.,  89  Conn.  645,  95  Atl.  12...   179 

Branch  v.  Bulklev,  109  Va.  784,  65  S.  E.  652 311,313 

Branch  v.  De  Wolf,  28  R.  I.  542,  68  Atl.  543 305 

Brandon  v.  Carter,  119  Mo.  572,  24  S.  W.  1035 6,308 

Bried  v.  Minthrup,  203   Mo.  App.   567,  219   S.  W.  703 197,198 

Brightman   v.    Bates,    175    Mass.    105 65 

Briscoe  v.  Bank  of  Com.  Ky.,  36  U.  S.  11,  Pet.  257,  349,  9  L. 

Ed.    709,    745 395 

Briston  v.   Barker,   14   Johns  205 387,  412 

Brock  V.  Conkwright,  179  Ky.  555,  200  S.  W.  962 171 

Brown  v.   Brown,  247   111.  528,  93  N.  E.  357 28 

Brown  v.  Pacific  M.  Steam  Co.,  5   Blatch.   525 66 

Brown  v.  Spohr,  87  App.  Div.  522  Sup.  Ct.  84  N.  Y.  S.  995....       5 
Bruant  v.  Richardson,  126  Ind.  145,  25  N.  E.  807 135 


Table  of  Cases.  747 

Budd  V.  New  York,  143  U.  S.  523,  36  L.  Ed.  250 388 

Buist  V.  Williams,  88  S.  C  252,  70  S.  E.  817 302 

Bullock  V.  Angleman.  82  N.  J.  E.  23,  87  Atl.  627 304 

Bunn  City  v.  City  of  Laredo   (Tex.)   213  S.  W.  320 173 

Burch  V.  Gaston,  182  Ala.   467,  62   So.  508 303 

Burke  v.   Burke,   259   111.   262,   102   N.   E.   293 4,35,73,76 

Burling  v.  Newlands,  112  Cal.  476,  44  Pac.  810 18 

Burney  v.  Atkinson   (Tenn.  Ch.)    54  S.  W.  998 223 

Burt  V.  Lathrop,   52  Mich.   106,  17  N.  W.  716 236,250 

Butchers  U.  S.  H.  v.  Crescent  City,  111  U.  S.  746,  28  L.  Ed.  585.   408 

Butler  V.  Badger,  128  Minn.  99,  150  N.  W.  233 74 

Buzard  v.  Bank,  67  Tex.  89,  2  S.  W.  54 200 

Byrne  v.  Jones,  159  Fed.  321,  90  C.  C.  A.  101 78,79. 

C. 
Cadell    V.    Palmer,    10    Bing.    140-2-4-51    Id.    (1833)    1    Clark    & 

F.  372    27 

Cahlan  v.  Bank  of  Lassen  County,  11  Cal.  App.  533,  105  Pac. 

765     "7 

Caldwell  v.  Graham,  115   Md.   122,  SO   Atl.   839 206 

California  v.  Central  P.  R.  R.,  127  U.  S.  40,  32  L.  Ed.  157....   393 
Cameron  v.  Cameron,  10  Smedes   (Miss.)   394,  48  Am.  Dec.  759.     11 

Campbell    v.    Campbell,    8    Fed.    460 192 

Campbell  v.   Noble,    145   Ala.   233,  41   So.   745 5 

Campbell   v.   Virginia-Carolina   Chemical   Co.,   68    S.   C.   440,   47 

S.    E.    716 179 

Canada  v.  Daniel,  175  Mo.  App.  55,  157  S.  W.  1032 165 

Canadian  v.  Johnson   (Tex.  Civ.  App.)   176  S.  W.  835 150 

Candelaria  v.  Miera,  18  N.  M.  107,   134  Pac.  829 206 

Carne  v.  Long,  2  De  Gex,  F.  &  J.  75 32 

Carr  v.  Carr,  15  Cal.  App.  480,  115  Pac.  261 7 

Carleton  v.   Roberts,  1  Posey,  Unrep.  Cas.   587 155 

Carr  v.  Leahy,  217  Mass.  438,  105  N.  E.  445 197 

Carrier  v.  Carrier,  226  N.  Y.  114,  123  N.  E.  135 183,  307 

Carrier  v.  Price    (1891)    3  Ch.  159 32 

Carroll  v.  Woods,   132   Mo.  App.   492,   111   S.   W.   885 3 

Catt  V.  Wm.   Knabe  &  Co.   Manuf'g   Co.,   93   Va.   736,   26   S.   E. 

246     82,217 

Cavender   v.   Cavender,    114   U.    S.   R.   464 226,227 

Central  Trust  Co.  v.  Gaffney,  157  App.  Div.   501,  142  N.  Y.  S. 

902     5,  208,  304 

Central  Trust  Co.  v.  Johnson    (Ky.)    74  S.  W.  663 220 

Chapin  Petitioner,  148  Mass.  588,  20  N.  E.  195,  2  L.  R.  A.  768, 

26    R.    C.    L.    1377 92 

Chaves  v.   Myer,   13   N.    M.   368,   85   Pac.   233 81 

Cheatham  v.  Rowland,   22  R.   I.   245,   47   Atl.   365,  63   L.  R.  A. 

227     «9 

Chesnutt  v.  Gann,  76  Tex.  150,  13  S.  W.  274 174 

Citizens'  Nat.  Bank  v.  Jefferson,  88  Ky.  651,  11  S.  W.  767 178 

Citizens'  Nat.  Bank  v.  McKenna,  168  Mo.  App.  254,  153   S.  W. 

521 3,75 

City  of  Austin  v.  Cahill,  99  Tex.  172,  88  S.  W.  542,  89  S.  W.  552.       5 


748  TabIvK  of  Cases. 

Clay  V.  Thomas,  178  Ky.  199,  198  S.  W.  762 77,194 

Clemens  v.  Heckscher,  185  Pa.  276,  40  Atl.  80 174 

Clough  V.   Clough,  117   Mass.   83 13 

Cochran  v.  Richmond  &  A.  R.  Co.,  91  Va.  339,  21  S.  E.  664.. 205,  223 

Coleman  v.  Knights  of  Honor,  18  Mo.  App.  189,  194 259 

College  V.  McHugh,  39  Tex.  348 202 

Colvin  V.  Martin,  68  App.  Div.  633,  74  N.  Y.  S.  11 74 

Comingor  v.  Louisville  Trust  Co.,  128  Ky.  697,  108  S.  W.  950..   220 

Commonwealth  v.  Adams  Ex.  Co.,  123  Ky.  720,  97  S.  >V.  386 114 

Commonwealth  v.  Cary  Imp.  Co.,   98  Mass.   19 337 

Commonwealth  v.  Hamilton  Mfg.,  12  Allen  298 336,  337 

Commonwealth  v.   Knowlton,  2  Mass.  529,  534 107 

Commonwealth  v.  People  Fire  C.  S.  B.,  5  Allen  428 337 

Commonwealth   v.   Vrooman,    164    Pa.    St.    306,   30   Atl.   217,   25 

L.  R.  A.  250,   44  Am.   St.   Rep.   603 362,369 

Cone  V.  Cone,  61  S.  C.  512,  39  S.  E.  748 309 

Conley  v.  Daughters  of  the  Republic,  156  S.  W.  197  (Texas)...  5 
Connally  v.  Lyons,  82  Tex.  664,  IS  S.  W.  799,  21  Am.  St.  Rep. 

935     36,  53,  198,  230 

Connecticut   v.    Commonwealth,    133    Mass.    161 337 

Corfield  v.  Corvell,  4  Wash.  C.  C.  380 403,  407 

Costello  V.  Costello,  209  N.  Y.  252,  103  N.  E.  148 195,198 

Cotting  V.  Berry,  50  Colo.  217,  114  Pac.  641 208 

Cotton  V.  Rand    (Ky.)    92  S.  W.  266 185 

Cotulle  V.  Mortgage   (Tex.  Civ.  App.)   86  S.  W.  339 162 

Cowie  V.  Strohmeyer,  150  Wis.  401,  136  N.  W.  956 23,198 

Cox  V.  Cox,  95  Va.  173,  27  S.  E.  834 137 

Cox  V.  Hickman,   8  H.   L.  C.  268 246,284 

Craft  V.  Craft  74  Fla.  262,  76  So.  772 79 

Crawford  v.  El  Paso  Land  Improvement  Co.    (Tex.  Civ.  App.) 

201    S.   W.   233    176, 183 

Crawford  v.  Niles,  224  Mass.  474,  113  N.  E.  408 305 

Cristman   v.   Peck,   90   111.    150 127 

Crocker   v.   Malley,   249   U.    S.   223,   63   L.   Ed.   573,   2   A.   L.   R. 

1601,   39    Sup.   Ct.    270 19,  47,  57,  343,  344 

Crohn  v.   K.   C.  Home  Tel.  Co.,   131   Mo.  App.   313,   109   S.  W. 

1068     267 

Cromwell  v.  Tate,  7  Leigh.   (Va.)   301,  30  Am.  Dec.  506 20 

Cross   v.    Jackson,   5   Hill.    478 36 

Crown  V.  Cohn,  88  Ore.  642,  172  Pac.  804 7,177,181 

Crowther  v.   Thorley,   32   W.   R.   330 237 

Grundy  v.  Drye,   104  Ky.  825,  48   S.   W.  155 167 

Culver  V.  Lompoc  Valley  Savings  Bank,  22  Cal.  App.  379,  134 

Pac.   355    308 

Curtis  V.  Curtis,  185  App.  Div.  391,  173  N.  Y.  S.  103 7 

Curtis  v.  Leavltt,  15  N.  Y.  9 411,  412 

D. 
Dana  v.  Treasurer  &  R.  General,  227  Mass.  562,  116  N.  E.  941. .     98 

Darrett   v.   Donnelly,   38   Mo.   492 258 

Davis  V.   Hudgins    (Tex.),   225   S.  W.  73 19,46,57,352,353 


Table  of  Cases.  749 

Davis   V.    Lusk,    191    III.    620,    61    N.    E.    483 228 

Dayton  v.   Stewart,  99   Md.   643,  59  Atl.   281 6,22,74,75 

Dearborn  v.  N.  W.  Sav.  Bank,  42  Ohio  St.  617,  51  Am.  Rep.  851.   396 

Dennett  v.  Dennett,  40  N.  H.  498,  503,  43  N.  H.  499,  501 28 

Denvir  v.  Park,  169  Mo.  App.  335,  152  S.  W.  604 215,217,221 

Dettmer   v.    Behrens,    106    la.    585,    76    N.    W.    853,    68   Am.    St. 

Rep.    32&    13 

Dickson  v.  N.  Y.  Biscuit  Co.,  211  111.  468,  71  N.  E.  1058 179,180 

Digney  v.   Blanchard,   226   Mass.   335,   115   N.  E.   424 207 

Dillard  v.  Dillard,  97  Va.  434,  34  S.  E.  60 178 

Dillivan  v.  German  Savings  Bank   (la.)   124  N.  W.  350.  .194,  205,  208 

Dingman  v.   Boyle,  285   111.   144,   120  N.   E.  487 172,173 

Dodge  V.  Dodge,  109  Md.  164,  71  Atl.  519 308,  309 

Dodge  V.  Lacey    (Tex.)    216  S.  W.  400 173 

Dolph  V.  Cincinnati,  B.  &  C.  R.  Co.,  56  Ind.  App.  137,  103  N. 

E.    13    182 

Donnelly  v.  Alden,  229  Mass.  109,  118  N.  E.  298 346 

Doom  V.  Howard    (Ky.)    64  S.  W.  469 219 

Dorman  v.  Balestier,  175  N.  Y.  S.  677 74, 171 

Down  V.   Collins,   6   Hare.   418 109 

Doyle  V.  Continental  Ins.  Co.,  94  U.  S.  535,  24  L.  Ed.  148 380 

Drovers'  Deposit  Nat.  Bank  v.  Newgass,  161  App.  Div.  769,  147 

N.    Y.    S.    4 75 

Dyer  v.  Sullivan,  18  Tex.  771 202 

E. 

Easton  v.  Demuth,  179  Mo.  App.  722,  162  S.  W.  294 23 

Easton  v.  Houston  &  T.  C.  Ry.  Co.,  40  Fed.  189 218 

Edgerly  v.  Barker,  66  N.  H.  434,  31  Atl.  900,  28  L.  R.  A.  328..     25 

Edgerton  v.  Preston,  15  111.  App.  23 133 

Elias  v.  Schweyer,  17  Misc.  707,  40  N.  Y.  S.  906 228 

Eliot  v.   Freeman,   220   U.   S.    178,   31    Sup.   Ct.   360,   55   L.    Ed. 

424     43,  51,  111,  251,  321,  342 

Ellicott  V.  Kuhl,  60  N.  J.  E.  333,  46  Atl.  945 81 

English  V.  Mclntyre,  29  App.  Div.  439,  51  N.  Y.  S.  697 166,346 

Evans  v.  Evans,  200  Ala.  329,  76  So.  95 79,  80 

Ex  Parte  Jonas,  186  Ala.  567,  64  So.  960 137 

Ex  Parte  Tartar,  278  Mo.  356,  213  S.  W.  94 96,207 


P. 

Falardeau  v.  Boston  A.  S.  Assn.,  182  Mass.  405,  65  N.  E.  797..  90 
Farmers'  Loan  &  Trust  Co.  v.  Chicago  &  A.  Ry.  Co..  27  Fed. 

146     39,  134,  135,  170 

Faulds  v.   Yates,  57   111.  416 65 

Feldman  v.  Preston,  194  Mich.  352,  160  N.  W.  655 197 

Fesmire— Appeal  of,  134  Pa.  67,  19  Atl.  502 174 

Fidelity  &  Deposit  Co.  of  Maryland  v.  Rankin,  33  Okla.  7,  124 

Pac.    71    79 

Fisher  v.  Hampton  Transp.  Co.,  136  Mich.  218,  98  N.  W.  1012..  4 
Fisheries  Co.  v.  McCoy  (Tex.  Civ.  App.)  202  S.  W.  343.-205,209,210 


750  Tabi,e  0^  Cases. 

Flint  V.  Stone,  220  U.  S.  107,  55  L.  Ed.  S89,  31  Sup.  Ct.  342 322 

Flovd  V.  Smith,  59  Fla.  485,  51  So.  537 5 

Forbes  v.  Brigham,  232  Mass.  177,  122  N.  E.  396 306 

Forney  v.  Remey,  77  Iowa  549,  42  N.  W.  439 11,  14 

Forster   v.  Ftiller,   6   Mass.   58 213 

Fox  V.  Fox.  250  111.  384,  95  N.  E.  498 223 

French  v.  French,  58  Ind.  App.  621,  108  N.  E.  786 78 

French  v.  Hall,  198  Mass.  147,  84  N.  E.  438 181 

Fritz  V.  City  Trust  Co.,  72  App.  Div.  532,  76  N.  Y.  S.  625..  173,  207 

Frost  V.  Thompson,  219  Mass.  360,  106  N.  E.  1009 36,92,101 

Frost  V.  Walker,   60  Maine  468,  471 107 

Fyler  v.  Fj'ler,  2  Railwy.  Cas.  813 110 

G. 

Galvin  v.  McConnell,  53  Tex.  Civ.  App.  486.  117  S.  W.  211 358 

Gardiner  v.   Cord,   145  Cal.   157,  78   Pac.  544 182 

Garrard  v.  Hardey,  5  Man.  &  G.  471 106 

Gartside  v.  Gartside,   113   Mo.  348,  20   S.  W.  669 227 

Garrish  v.  Institution,  128  Mass.  159,  35  Am.  Rep.  365 13 

Gifford  V.  Hart,  1  Sch.  &  Lef.  386 320 

Gifford    V.    Livingston,    2    Denio    380 327 

Gilbert  v.  Penfield,  124  Cal.  234,  56  Pac.  1107 177 

Gillespie  v.  People,  188  111.  176,  80  Am.  St.  Rep.  176,  52  L.  R. 

A.    283     37 

Gisborn  v.  Charter  Oak  Ins.  Co.,  12  Sup.  Ct.  277 4,  82 

Givens  v.  Clem,  107  Va.  435,  59  S.  E.  413 304 

Glazier  v.   Everett,   224   Mass.   184,   112  N.  E.  1009 172 

Gleason  v.   McKay,   134   Mass.   419 38,106,107,233,251,331. 

Globe   Woolen    Co.    v.   Utica   Gas    &   Elec.    Co.,    224    N.    Y.    483, 

121   N.    E.   378 185 

Colder   v.    Bressler,    105    111.    419 229 

Goldman   v.    Page,   59    Miss.    404 154 

Gomez  v.  Gomez,  81  Hun.  56G,  31  N.  Y.  S.  206 182 

Gott  v.  Dinsmore.   Ill   Mass.   45 107 

Gould  V.  Gould,  245  U.  S.  151,  38  Sup.  Ct.  53,  62  L.  Ed.  211....  50 
Grafton  v.  Holt,  58  W.  Va.  182,  52  S.  E.  21,  6  Ann.  Cas.  403..  153 
Great  S.  Fire  P.  Hotel  Co.  v.  Jones,  177  U.  S.  449,  20  Sup.  Ct. 

690,   44   L.   Ed.   842 263 

Green's  Adm'rs  v.  Fidelity  Trust  Co.,   134  Ky.   311,   120   S.  W. 

283     308 

Green   v.   Pavey,  150   111.   513,  37   N.  E.  842 28,55 

Griffith  V.  Jewett,  9  Ohio  Dec.   (Reprint)   627 66 

Grundy  v.  Drye,  104  Ky.  825.  48  S.  W.  155,  49  S.  W.  469 167 

Guernsey   v.    Cook,    120    Mass.    501 67 

Guilfoil  V  Arthur,  158  111.  600,  41  N.  E.  1009 307 

Gulick  V.  Bruere,  42  N.  J.  Eq.  G29,  9  Atl.  719 228 

H. 

Hafer  v.  N.  Y.  Lake  E.  &  W.  R.  R.  Co.,  9  Ohio  Dec.   (Reprint) 

470     67 


Table  of  Cases.  75  i 


Hamilton  v.  Dooly,  15  Utah  280,  49  Pac.  769 77,78 

Hammerstein  Ex.  v.  Parsons,  38  Mo.  App.  332 260 

Hall  V.  Houston  &  T.  C.  R.  Co.,  52  Tex.  Civ.  App.  90,  114  S.  W. 

gg]^      166 

Hammond"  V."  Grander,    128    Mass.    272 109 

Hanna  v.  Clark,  204  Pa.  145,  53  Atl.  757 •   220 

Hanscom  v.  Maiden  &  Melrose  Gaslight  Co.,  234  Mass.  379,  125 

N.   E.   626    •••••   217 

Harden  v.  Ry.   Co.,   129   N.  C.   354,   40   S.  E.   184,   55  L.   R.   A. 

784,   85   Am.    St.   Rep.   747 84 

Hardwicke  v.  Wurmser   (Mo.  App.)    180  S.  W.  455 78 

Harper  v.  R.  R.  Co.,  36  Fed.  102 136 

Harris  v.  Amery,  Law  Rep.  1  C.  P.  148 272 

Harris  v.  Hicks,  13  Tex.  Civ.  App.  134,  34  S.  W.  983 361 

Harrison  v.  Heathorn,   6  Man.  &  G.   81 106 

Hart  V.  Equitable  Life  Assur,  Society,   172  App.   Div.   659,  158 

N.    Y.    S.    1063 164 

Hart  V.  Seymoure   (1893)   147  111.  598,  35  N.  E.  246,  7  A.  L.  R. 

613     24,  35, 103 

Hartman  v.  Evans,  38  Va.  669,  18  S.  E.  810 185 

Harvey  v.  Schwettman   (Mo.  App.)    180  S.  W.  413 220,226 

Hatch  V.  Rearson,  204  U.  S.  152,  27  Sup.  a.  188,  51  L.  Ed.  415, 

9    Ann.    Cas.    736 342 

Hawley  v.  Northampton,  8  Mass.  3-38,  5  Am.  Dec.  66 27 

Haulman  v.  Haulman,  164  la.  471,145  N.  W.  930.4,  8, 12, 14,  15, 18,  74 
Hawkridge  v.  Treasurer  &  R.  General,  223  Mass.  134,  111  N.  E. 

707     101 

Havemeyer  v.  Havemeyer,  43  Sup.  Ct.  N.  Y.  506 66 

Hayden  v.  Hayden,  178  N.  C.  259,  100  S.  E.  515 175 

Hayes  v.  Pratt,   13   Sup.   Ct.  503 185 

Havward  v.   Hapgood,   6   Gray  437 110 

Heckscher  v.  Blanton,  111  Va.  648,  69  S.  E.  1045,  66  S.  E.  859..   192 

Heidelbach  v.  Campbell,  95  Wash.  661,  164  Pac.   247 80 

Hemphill  v.  Ry.  Co.,  141  N.  C.  487,  54  S.  E.  420 84 

Hewitt  V.  Phelps,  105  U.  S.  400 203 

Hey  V.   Dolphin,   92   Hun.   230 66 

Higgins   V.  Lansingh,   154   111.   301,  40  N.  E.  362 65 

Hiil  V.   Hill    (Okla.)    152   Pac.    1122 137,171 

Hill  V.  Moors,  224  Mass.  163,  112  N.  E.  641 305 

Hitch   V.   Stonebraker's  Estate,   125   Mo.   128,   28   S.   W.  443 224 

Hoadley  v.  County  Commissioners,  105  Mass.  519.  .  .35,  107,  233,  338 

Hobbs   V.   McLean,   117   U.    S.    5C7 221,222 

Hoboken   Trust  Co.   v.   Norton,   90   N.   J.   E.   314,   107   Atl.   67..   220 

Hodgson  V.   Baldwin,  65  111.  532 129 

Holbrook  v.  Fvffe,  164  Ky.  435,  175  S.  W.  977 302 

Hollis  V.   Drew   Seminary,   95  N.  Y.    166 13 

Holmes  v.   McDonald,   220  111.   169,  80  N.  E.  714 206 

Holsapple  v.  Schrontz,  65  Ind.  App.  390,  117  N.  E.  547 2,7 

Hoosier  Mining  Co.  v.  Union  Trust  Co.,  173  Ky.  505,  191  S.  W. 

305     172, 173 

Howe  V.  Hodge,  152  111.  252,  38  N.  E.  1083 28 

Howe  v.  Morse,  174  Mass.  491,  55  N.  E.  213 28,  32 


752  Table  o^  Cases. 

Howell  V.  Harris-Cortner  &  Co.,  168  Ala.  383,  52  So.  935,  Ann. 

Cas.    1912    B.   236    Note 147 

Hoyt  V.  Bliss,  93  Conn.  344,  105  Atl.  699 178 

Hull  V.  Chaffin,  54  Fed.  437 181 

Hummel's   Appeal    (Pa.)    5    Atl.    669 223 

Hunnewell  v.  Willow  S.  Can.  Co.,  53  Mo.  App.  245 259 

Hunt  V.  Chicago  &  Dummy  Ry.  Co.,  20  HI.  App.  282 44 

Hussey  v.  Arnold,  185  Mass.  202,  70  N.  E.  87 197,209,236,250 

I. 

Illinois  Watch  Case  Co.  v.  Pearson,  140  111.  423 127, 131 

Imperial   Mfg.    Co.   v.    Schwartz,    105   111.   App.   525 34,133 

In  Re  Adams'  Estate,  221  Pa.  77,  70  Atl.  436 174,195,207,208 

In  Re  Agriculturist  Cattle  Co.,  L.  R.  5  Ch.  725 109 

In  Re  Arthur  Ave.  Assn.,  3  Ch.  D.  522 275,  284,  295 

In  Re  Assn.   Trust,  222  Fed.   1012 351 

In  Re  Battin,  89  N.  J.  E.  144,  104  Atl.  434 219,224,308,309 

In  Re  Borough  of  Kane,   177  Pa.   638,  35  Atl.  874 309 

In  Re  Bosler's  Estate,  161  Pa.  457,  29  Atl.  57 209,  219 

In  Re  Cozzens*  Estate,  15  N.  Y.  S.  771 206,  215 

In  Re  Darlington's  Estate,  245   Pa.  212,  91  Atl.  486 194 

In  Re  Dutton,  4  Exch.  Div.  54 32 

In  Re  Faure   Electric  Ac.  Co.,  40  Ch.  D.  141,  151,  152 237 

In  Re  Fox's  Estate,  264  Pa.  478,  107  Atl.  863 167 

In    Re    Froelich's    Estate,    50    Misc.    Rep.    103,    100    N.    Y.    S. 

436     175,  184,  186 

In  Re  Gay's  Estate,  138  Cal.  552,  71  Pac.  707 308 

In  Re  Graham  Estate,  218  Pa.  357,  67  Atl.  462 206 

In  Re  Hanson's  Estate,  159  Cal.  401,  114  Pac.  810 216,  219,  223 

In  Re  Hart's  Estate,  203  Pa.  480,  53  Atl.  364 194 

In  Re  Hodges'  Estate,  66  Vt.  70,  28  Atl.  663 79 

In  Re  Hoyt,  103  Misc.  Rep.  614,  170  N.  Y.  S.  846 171 

In  Re  Hubbell  Trust,  135  la.  637,  113  N.  W.  512 182 

In  Re  Jacobs,  98  N.  Y.  98,  50  Am.  Rep.   636 401,407 

In  Re  Jones    (1889)    2  Ch.   83 237 

In  Re  Kellogg,  214  N.  Y.  460,  108  N.  E.  844 172 

In  Re  Lane's  Will    (Del.)   97  Atl.  587 81, 175 

In  Re  Mahin  Estate,  161  la.  459,  143  N.  W.  420 3 

In  Re  Mallon's  Estate,  110  App.  Div.  N.  Y.  61,  97  N.  Y.  S.  23..   207 

In  Re  Mendel's  Will,  164  Wis.  136,  159  N.   W.  806 169 

In  Re  Mexican  &  S.  A.  Co.,  27  Beav.  474,  6  L.  R.  A.    (N.  S.) 

665     35, 103 

In  Re  Order  of  Sparta,  242  Fed.  235,  155  C.  C.  A.  75 351 

In  Re  Parker,  275  Fed.   868 348 

In    Re    Pittsburgh    Wagon    Wks.    Estate,    204    Pa.    432,    54    Atl. 

316     36,  93 

In  Re  Price's  Estate,  209  Pa.  210,  58  Atl.  280 225 

In  Re  Podha.isky  Est.,  137  la.  742,  115  N.  W.  590 12 

In   Re   Reich's    Estate,    230    Pa.    55,    79    Atl.    151 220 

In  Re  Siddall,  29  Ch.  D.  1 237 

In  Re  Soulard's  Estate,  141  Mo.  642,  43  S.  W.  617 2 


Table;  of  Casss.  753 

In  Re   Spreckles'  Estate,   162   Cal.   559,  123   Pac.   371 178 

In  Re  Stafford's  Estate,  258  Pa.  595,  102  Atl.  222 23 

In  Re  Thomas,  14  Q.  B.   D.  379 237 

In  Re  Van  Riper's  Estate,  90  N.  J.  Eq.  217,  107  Atl.  55 219 

International  Trust  Co.  v.  Preston  (Wyo.)  156   Pac.  1128.169,  204,  305 

Internat.  Y.  W.  C.  A.  v.  Y.  W.  C.  A.,  194  111.  194,  62  N.  E.  551. .  125 

Irvine  v.   Dunham,   111   U.    S.   R.   327 224 

J. 

Jackson  v.  Tel.  Co.,  139  N.  C.  347,  51  S.  E.  1015,  70  L.  R.  A. 

738  88 

Jarrett  v.  Johnson,  216  111.  212,  74  N.  E.  756 217 

Jencks  v.  Safe  Deposit  &  Trust  Co.  of  Baltimore,  120  Md.  62G, 

87    Atl.    1031 180 

Jessup  V.  Smith,  223  N.  Y.  203,  119  N.  E.  403 182,221,223 

Johnson  v.  Crawley,  25  Ga.  316,  71  Am.  Dec.  173 21 

Johnson  v.  United  States  Rys.  Co.   (Mo.l    219  S.  W.  39 77 

Jones  V.  Haines,  79  N.  J.  E.  110,  80  Atl.  943 23 

Jones  V.  Jones.  8  Misc.  Rep.   660,  30  N.  Y.   S.  177 225 

Jones  V.  Nicholas,  151   Iowa  362,  130  N.  W.  125 11 

Joseph  V.  Herzig,  135  App.  Div.  141,  120  N.  Y.  S.  34 192 

K. 

Kahn  v.  Tierney,  135  App.  Div.  897,  Sup.  Ct.  120  N.  Y.  S.  663..  5,  24 

Kantzler   v.    Bensinger,    214    111.    589 65 

Keating  v.   Keating,   182   la.  1056,   165   N.  W.  74 179 

Keely  v.  Black,  90  N.  J.  E.  439,  107  Atl.  825 209 

Kellev  V.   Snow,  185  Mass.  288,  70  N.  E.  89 5 

Kennedy  v.  Hodges,  215  Mass.  112,  102  N.  E.  432 101 

Keplinger  v.  Keplinger,  185  Ind.  81,  113  N.  E.  292 1 

Kerrison  v.  Stewart,  93  U.  S.  160,  23  L.  Ed.  843 150,152 

Keyes  v.  Carleton,  141  Mass.  45,  6  N.  E.  524 75 

Kilpatrick  v.  Robert,  278  Mo.  257,  212  S.  W.  884 218,  219 

Kimball  v.  Whitney,  233  Mass.  321,   123  N.  E.  G65 195 

King  V.  Townshend,  141  N.  Y.  358,  36  N.  E.  513 36 

King  V.  Webb,  14  East  406 102,  257 

Kinney  v.  Treasurer  &  R.  General,  207  Mass.  368,  93  N.  E.  586, 

Ann.  Cas.  1912  A  902,  35  L.  R.  A.   (N.  S.)   784 101 

Kipp  V.  O'Melveny,  2  Cal.  App.  142,  83  Pac.  264 177 

Klugh    V.    Seminole    Securities    Co.,    103    S.    C.    120,    87    S.    E. 

644     18,  194,  204 

Knipp  V.  Bagby,  126  Md.  461,  95  Atl.  60 197 

Koehler  v.    Koehler    (Ind.)    121   N.   E.   450 3 

Kreisel  v.  Distilling  Co.  of  A.,  61  N.  J.  Eq.  50 67 

L. 

Labouchere  v.  Tupper,  11  Moore  P.  C.  198 108 

Lane   v.    Brothers,    120    Ga.    355 126 

Lane  v.  Ewing,  31  Mo.  75,  77  Am.  Dec.  632 12 

Laney  v.  Fickel,  83  Mo.  App.  60 258 


754  Table  of  Cases. 

Langer  v.  Fargo  Mercantile  Co.    (N.  D.)    174  N.  W.  90 226 

Las  Vegas  Ry.  &  Power  Co.  v.  Trust  Co.  of  St,  Louis  County, 

17   N.   M.   286,   126  Pac.   1009 222 

Laughlin  v.    Page,   108   Me.   307,   80  Atl.   753 82 

Laurel  County  Court  v.  Trustees  of  Laurel  County  Seminary, 

93  Ky.  379,  20   S.  W.  258 215,311 

Lawrence  v.  Lawrence,  181  111.  248,  54  N.  E.  918 229 

Laws  V.  Christmas,  178  N.  C.  359,  100  S.  E.  587 2 

Ledbetter  v.  Ledbetter,   88   Mo.   Lo.   Cit.   62,   31   Cyc.   150 258 

Lee  V.  Albro,  91  Ore.  211,  178  Pac.  784 185 

Levine  v.  Gerardo,  60  X.  Y.  Misc.  261,  112  N.  Y.  Sup.  192 228 

L-ewis  V.  Curnutt,  130  Iowa  423,   106  N.  W.  914 11 

Lilly  V.  Tobbein,  103   Mo.   477,  15  S.  W.   618,  23  Am.  St.  Rep. 

887 264 

Lindsley  v.  Dodd,  53  N.  J.  E.  69,  30  Atl.  896 192,313 

Lippold  V.  Lippold,  112  la.  134,  83  N.  V/.  809,  84  Am.  St.  Rep. 

331 13 

Locke  V.  Cope,  45  Okla.  69,  146  Pac.  416 175 

Logan  V.  Ry.  Co.,  116  N.  C.  940,  21   S.  E.  959 84 

Loring  v.  Hildreth,  170  Mass.  328,  49  N.  E.  652 6 

Loring  v.  Marsh,  70-73  U.  S.  Sup.  Ct.  802 176 

Loud  V.  Winchester,  52  Mich.  174,  17  N.  W.  784 164 

Lovato  V.  Catron,  26  N.  M.  168,  148  Pac.  490 ^ 167 

Love  V.  Blauw,  61  Kan.  496,  59   Pac.  1059,  48  L.  R.  A.  257,  78 

Am.    St.    334 11 

Ludington  v.  Mercantile  Nat.  Bank,  102  App.  Div.  251,  92  N.  Y. 

S.    454 347 

Lynn  v.  Lynn,  135  111.  18 8 

M. 

Mabry  v.  Ry.  Co.,  139  N.  C.  388,  52  S.  E.  124 84 

Maclaren  v.   State,  141  Wis.  577,  124   N.  W.   667 369 

Makin  v.  Savings  Inst.,  23  Me.  350,  41  Am.  Dec.  389 236,250 

Matter  of  Assn.  Trusts,  222  Fed.  1012 351 

Matter  of   Tilden's  Ex'rs,   98   X.  Y.  434 319 

McCartin  v.  Administrator  of  Traphagen,  43  N.  J.  Eq.  323,  11 

Atl.    156     209 

McCaugn  v.  Young,  85  Miss.  277,  37  So.  839 196 

McCloskey  v.  Bowden,  82  X.  J.  Eq.  410,  89  Atl.  528 222 

McCord  V.  Xabours,  101  Tex.  494,  109  S.  W.  913,  111  S.  W.  144..   163 

McCormick  v.  McCormick's  Adm'r  (Ky.)   121  S.  W.  450 80 

McCoy  V.  McCoy,  30  Okla.  379,  121  Pac.  176 302 

McDonald  v.   Flour  Mills  Co.,  31  Fed.  577 135 

McFerran  v.   Fidelity  Trust  Co.,  140  Ky.  536,  131  S.  W.  393..   166 

McGeorge  v.  Bigstone  Gap  Imp.  Co.,  88  Fed.  599 174 

McKenna  v.  O'Connell,  84  Misc.  Rep.  582,  147  N.  Y.  S.  922....   307 

McLean  v.  Fleming,   96  U.   S.   245 126 

JIcLean  v.  McLean,  88  N.  C.  394 84 

McRoberts  v.  Carneal    (Ky.)    44  S.  W.  442 205,312 

McVay  v.  McVay,  43  N.  J.  Eq.  47.  10  Atl.  178 6 

Mallev  v.  Bowditch,  259  Fed.  809,  7  A.  L.  R.  608,  170  C.  C.  A. 

609     38,  111,  339 


Table  of  Cases.  755 

Mallory  v.  Russell,  71  la.  63,  6  Am.  Rep.  776,  32  N.  W.  102 35 

Manderson  v.  Appeal,   113   Pa.   631,  6   Atl.   S93 186 

Mann  v.  Day,  199  Mich.  88,  165  N.  W.  C43 182, 193 

Markel  v.  Peck,  168  Mo.  App.  358,  151  S.  W.  772 215 

Marshall   v.  Marshall,   11   Colo.  App.   505,  53   Pac.  617 183,313 

Marks  v.  Sample,  111  Ala.  637,  20  So.  791 218 

Marston  v.  Carter,  12  N.  H.  159 28 

Martin  v.  Dryden,  1  Oilman   (111.)    187 154 

Mason  v.  Pomeroy,  151  Mass.  164,  24  N.  E.  202 203,  347 

Massey  v.  Huntington,  118  111.  80,  7  N   E.  269 6 

Matter  of  Hawley,  100  N.  Y.  206,  3  N.  E.  68 319 

May  V.  May,  17  Sup.  Ct.  824 224,  307 

Maydwell  v.  Maydwell,  135  Tenn.  1,  185  S.  W.  712 224 

Maynard  v.  Columbus,  150  Ky.  817,  150  S.  W.  1019 182 

Mayo  V.  Moritz,  151  Mass.  481,  24  N.  E.  1083 53.  74,  168,  235,  249 

Meldon  v.  Devlin,  31  App.  Div.  146,  53  N.  Y.  S.  172 174 

Melson  v.  Travis,  133  Ga.  710,  66  S.  E.  936 204 

Memphis  Sav.  Bank  v.  Houchens,  115  Fed.  96 303 

Mercer  v.  Safe-Deposit  &  Trust  Co.,  91  Md.  102,  45  Atl.  865 74 

Merchants  Natl.  Bank  v.  Wehrmann,  69  Ohio  St.  160,  68  N.  E. 

1004 36 

Metcalfe  v.  Union  Trust  Co.,  87  App.  Div.  144,  85  N.  Y.  S.  183.  . .     21 

Miller  Trustee  v.  Smythe,  92  Ga.  154,  18  S.  E.  46 88 

Millett  V.  People,  117  111.  294,  5  West.  Rep.  155 410 

Mills  V.  Mills,  63  Fed.  511 78 

Mitchell  V.  Whitlock,  121  N.  C.  166,  28  S.  E.  292 90 

Mobile  &  O.  Ry.  Co.  v.  Nichols,  98  Ala.  92 66 

Moore  v.  First  Nat.  Bank,  154  Mo.  App.  516,  135  S.  W.  1005 79 

Morel  v.  Hoge.  130  Ga.  625 ; 67 

Morrill  v.  American  Reserve  Bond  Co.,  151  Fed.  305 165 

Morris  v.  Boyd,  110  Ark.  468,  162  S.  W.  69 304-305 

Morrison  v.  Kelly,  22  111.  622 73 

Moulden  v.  Train,  199  Mo.  App.  509,  20i  S.  W.  65 2,  3 

Muhlke  V.  Tiedemann,  280  111.  534,  117  N.  E.  708 216 

Mullaney  v.  Schott,  135  111.  655,  26  N.  E.  640,  25  A.  S.  R.  401 21 

Munn  V.  Illinois,  94  U.  S.  113,  24  L.  Ed.  77 410 

Murry  v.  Berkshire  Ins.  Co.,  104  Mass.  586 336 

Murry  v.  King,  153  Mo.  App.  710,  135  S.  W.  107 78,  166,  167 

Myers  v.  Manhattan  B.,  20  Ohio  283 368 


N. 

Nance  v.  Hemphill,  1  Ala.  551 ' 412 

Nellis  v.  Rickard,  133  Cal.  617,  66  Pac.  32 167 

Nev/  Orleans  v.  Whitney,  138  U.  S.  595,  11  Sup.  Ct.  Rep.  428 136 

New  V.  Nicoll,  73  N.  Y.  127,  29  Am.  Rep.  Ill 203 

Newton  v.  Bealer,  41  Iowa  334 13 

Nichols  V.  Eaton,  91  U.  S.  R.  717 304 

Nichols  V.  Emery,  109  Cal.  323,  41  Pac.  1089 4,  75 

Nickerson  v.  Atchinson  &  T.  &  S.  F.,  17  Fed.  408 7 

Nixon  V.  Nixon,  268  111.  524,  109  N.  E.  294 171 

Nolan  V.  Guggerty,  187  la.  980,  174  N.  W.  706 3 


756  Table  of  Cases. 

Norling  v.  Allee,  10  N.  Y.  S.  97 206 

Northrip  v.  Burge,  225  Mo.  641,  164  S.  W.  584 5,  308 

Noyes  v.  Turnbull,  130  N.  Y.  639,  29  N.  E.  145 346 

O. 

Oellien  v.  Gait,  150  Mo.  App.  537,  131  S.  W.  158 221 

Offutt  V.  Divine's  Ex'r.   (Ky.)   53  S.  W.  816 219 

Ogden  V.  Allen,  225  Mass.  595,  114  N.  E.  862 82 

Ohio  Miss.  R.  R.  Co.  v.  State,  49  Ohio  St.  668 66 

Oliver  v.  Wash.  Mills,  11  Allen  268 336 

O'Malley  v.  Mears,  240  Pa.  373,  87  Atl.  862 312 

Otjen  V.  Frohbach,  148  Wis.  301,  134  N.  W.  832 6 

Owen  V.  Delamere,  L.  R.  15  Eq.  134 108 

Oxley  V.  Butler  Co.,  121  Mo.  614,  26  S.  W.  367 228 

P. 

Page  V.  Gillett,  26  Colo.  App.  204,  141  Pac.  866 173 

Pape  V.  Cap.  B.  of  Topeka,  20  Kan.  440,  27  Am.  Rep.  183 396 

Parker  v.  Kelley,  166  Fed.  968 224,  225,  227 

Patterson  v.   Hewitt,   25   Sup.   Ct.  35 311 

Patterson  v.  Northern  Trust  Co.,  207  111.  App.  361,  286  111.  564, 

122    N.    E.    55 168,221 

Patrick  v.  Patrick,  135  Ky.  307,  122  S.  W.  159 217 

Peabody  v.  Treasurer  &  R.  General,  215  Mass.  129,  102  N.   E. 

435    97, 101 

Pembroke  Academv  v.  Epsom  School,  75  N.  H.  408,  75  Atl.  100. .       2 

Pennington  v.  Smith,  69  Fed.  188 80,  303 

People,  ex  rel.  Winchester  v.  Coleman,  133  N.  Y.  279,  31  N.  E. 

96,  16  L.  R.  A.  183 324 

People's  Inv.  Co.  v.  Crawford  (Tex.  Civ.  App.)  45  S.  W.  738 358 

People  V.  Lieb,  85  111.  484 127 

People  V.  Loewenthal,  93  111.  191 396 

People  V.  Loew,  19  Misc.  248,  44  N.  Y.  S.  42 369 

People  V.  Marx,  99  N.  Y.  377,  2  N.  E.  29 408 

People  V.  Niagara,  4  Hill  20 326 

People  V.  Rose,  219  111.  46,  76  N.  E.  42 120 

People  V.  Utica  Ins.  Co.,  15  Johns.  358,  8  Am.  Dec.  243 387 

People  V.  Wemple,  117  N.  Y.  77,  6  L.  R.  A.  303,  52  Hun.  434 326 

Perry  v.  German  &  Blaebaum,  66  W.  Va.  566,  60  S.  E.  604 208 

Pettis  V.  Atkins,  60  111.  454 129 

Phillip  Carey  Co.  v.  Pingree,  223  Mass.  352,  111  N.  E.  857 198 

Phillips  v.  Blatchford   (1884),  137  Mass.  510 104,  233 

Phillips  v.  Sanger  Lumber  Co.,  130  Cal.  431,  62  Pac.  749 168 

Pilsen  Brewing  Co.  v.  Wallace,  291  111.  59,  125  N.  E.  714,  8  A. 

L.  R.   579 45 

Pollock  V.  House  &  Hermann,  84  W.  Va.  421,  100  S.  E.  275 308 

Poole  V.  Mueller   (Tex.  Civ.  App.),  30  S.  W.  951 147 

Portland  Bank  v.  Apthorp,  12  Mass.  252 337 

Powell  V.  Pennsylvania,  127  U.  S.  678,  32  L.  Ed.  253,  8  Sup.  Ct. 

Rep.    992    37,373 


Table  oi^  Cases.  757 

Pray  v.  Hegeman,  98  N.  Y.  351 315,  320 

President  &  Trustees  of  Bowdoin  College  v.  Merritt,  54  Fed.  55. .   165 
President,    etc.    of    Harvard    College    v.    Attorney    General,    228 

Mass.  396.  117  N.  E.  903 74 

Preston  v.  Walsh,  10  Fed.  315 312 

Priestley  v.  Burrill,  230  Mass.  452,  120  N.  E.  100 97 

Primeau  v.  Granfield,  184  Fed.  480 80 

Prinz  V.  Lucas,  210  Pa.  620,  80  Atl.  309 92 

Purdy  V.  Lynch,  145  N.  Y.  462,  40  N.  E.  232 216 

Pyle  V.  Pyle,  137  App.  Div.  568,  122  N.  Y.  S.  256 228,  308 

R. 

Rackemann  v.  Tilton,  236  111.  49.  86  N.  E.  168 23,  218 

Rand  &  Farquhar,  226  Mass.  91,  115  N.  E.  286 173,  215,  346,  347 

Randolph  v.  Hinck,  288  111.  99,  123  N.  E.  273 171 

Ranzau  v.  Davis,  85  Ore.  26,  165  Pac.  1180 82 

Reaves  v.  Coffman,  87  Ark.  60,  112  S.  W.  194 80 

Red  Bud  Realty  Co.  v.  South.  96  Ark.  281,  131  S.  W.  340.  . .  .   80,  193 

Reeder  v.  Reeder,  184  la.  1,  168  N.  W.  122 176 

Reg  V.  Whitmarsh,  15  Q.  B.  600 284,  293 

Reich  v.  Cochran,  151  N.  Y.  122,  45  N.  E.  367,  37  L.  R.  A.  805, 

56  Am.  St.  Rep.  607 315 

Reichert  v.  Mo.  &  111.  Coal  Co.,  231  111.  238,  83  N.  E.  160,  121  Am. 

St.  Rep.  307 172-228 

Reynolds  v.  Sumner  (111.).  14  N.  E.  661 312 

Reynolds  v.  Thompson,  161  Ky.  772,  171  S.  W.  379 4,  74 

Rhode  Island  Hosp.  v.  Copeland,  39  R.  I.  193,  98  Atl.  273 53,  242 

Richards  v.  Wilson,  62  Ind.  A.  4.  112  N.  E.  780 2 

Rice  V.  Merrill,  223  Mass.  279,  111  N.  E.  860 75 

Rice  V.  Rockefeller,  134  N.  Y.  174,  31  N.  E.  900,  17  L.  R.  A.  237, 

30  Am.  St.  Rep.  658 Ill,   352 

Righter  v.  Riley,  42  W.  Va.  633,  26  S.  E.  357 304 

Ricker  v.  Am.  Loan  &  T.  Co.,  140  Mass.  346,  5  N.  E.  284 234,  323 

Ringrose  v.  Gleadall,  17  Cal.  App.  664,  121  Pac.  407 7 

Riordan  v.  Schlicher,  146  Ala.  615,  41  So.  842 166 

Ritchie  v.  People.  155  111.  98.  40  N.  E.  454,  29  L.  R.  A.  79 38 

Robbins  v.   Butler,  24   111.   387 129 

Robey  v.  Smith  Ind.  Sup.,  30  N.  E.  1093 135 

Robinson  v.  Robinson,  105  Me.  68,  72  Atl.  883 177 

Rogert  V.  Decker,  131  N.  Y.  490 828 

Ross  V.  South  Delaware  Gas  Co.  (Delaware),  89  Atl.  593 166 

Rothenberger  v.  Garrett,  224  Mo.  191,  123  S.  W.  574 308 

Rouse  V.  Rouse,  176  N.  C.  171.  96  S.  E.  986 310 

Roush  V.  Griffith,  150  N.  C.  820,  65  S.  E.  168 310 

Royal  V.  Royal,  30  Ore.  448,  47  Pac.  828 222 

Rudolph  V.  Southern  B.  League,  23  Abbott's  N.  C.  199 126 

Ruhstrat  v.  People,  185  111.  133,  57  N.  E.  41,  49  L.  R.  A.  181 36 

Russell  V.  Hartley,  83  Conn.  654,  78  Atl.  320 180 

Rutherford  v.  Ott,  37  Cal.  App.  47,  173  Pac.  490 217 


758  Table  of  Cases. 

s. 

Sanford  v.  Howard.  29  Ala.  684 203 

Sartor  v.  Newberry  Land  &  Security  Co.,  104  S.  C.  184,  88  S.  E, 

467    219 

Sawyer  v.  Railroad,  142  N.  C.  1,  54  S.  E.  793,  115  Am.  St.  Rep. 

716    88 

Schumacher  v.  Dolan,  154  la.  207,  134  N.  W.  624 4 

Schuster  v.  Crawford  (Tex.  Civ.  App.)  199  S.  W.  327 156 

■Scoville  V.  Brock,  SI  Vt.  405,  70  Atl.  1014 207 

Sharon  v.  Hill,  23  Fed.  353 135 

Sedg\vick.  J.  v.  Williams,  8  Mass.  162 212 

Shaw  V.  Bridgers,  161  N.  C.  246,  76  S.  E.  827 179 

Shaw  V.  R.  R.,  5  Gray  (Mass.)  162 152 

Shaw  V.  Shaw,  .=-.1  Tex.  Civ.  App.  55,  112  S.  W.  127 162 

Shirk  V.  City  of  LaFayette,  52  Fed.  857 134 

Shelton  v.  Harrison,  182  Mo.  App.  404,  167  S.  W.  634 76 

Shepang  v.  Trust  Cases,  60  Conn.  553 67 

Sherman  v.  Williams,  84  Tex.  421,  19  S.  W.  606,  31  Am.  St.  Rep. 

66    153 

Sbirkey  v.  Kirby,  110  Va.  455,  66  S.  E.  40 303 

Shoe  &  Leather  N.  Bank  v.  Dix,  123  Mass.  148,  25  Am.  Rep.  49. .   210 

Silver  v.  Investment,  183  Mo.  41,  81  S.  W.  1098 268 

Simmons  Hdw.  Co.  v.  Warbel,  1  S.  D.  488,  47  N.  W.  814,  36  A.  S. 

R.  755,  11  L.  R.  A.  267 92 

Simpson  v.  Alexander  (Tex.  Civ.  App.),  188  S.  W.  285 162 

Sinking  Fund  Cases,  99  U.  S.  700,  25  L.  Ed.  496 388 

Skeen  v.  Marriott,  22  Utah  73,  61  Pac.  296 6,  7,  18,  22,  74 

Slaughter-House  Cases,  83  U.  S.  16,  21  L.  Ed.  394. .  .   46,  373,  385,  404 
Slaughter  v.  Am.  Bapt.  P.  Soc.  (Tex.  Civ.  App.)  150  S.  W.  224. . .   156 

Slawson  v.  Loring,  5  Allen  340 214 

Smallwood  v.  Lawson,  183  Ky.  189,  208  S.  W.  808 193,  307 

Smith  V.  Anderson,  15  Ch.  D.  247,  273,  4,  7,  282 51,  53,  236,  269 

Smith  V.  Robinson,  83  N.  J.  E.  384,  90  Atl.  1063 186,  193 

Smith  V.  San  Francisco  &  N.  P.  Ry.  Co.,  115  Cal.  584,  35  L.  R.  A. 

309    65 

Smith  V.  Smith   (Ky.),  121  S.  W.  1002 2 

Smith  V.  Smith,  19  S.  W.  595 165 

Smith  V.  Swormstadt,  16  How.  288,  14  L.  Ed.  942 153 

Snodgrass  v.  Snodgrass,  176  Ala.  276,  58  So.  201 312 

Snyder  v.  Wiley,  59  Tex.  449 202 

Sommerset  Ry.  v.  Pierce,  98  Me.  528,  57  Atl.  888 82,  221,  222 

Southern  Ry.  Co.  v.  Glenn's  Adra'r.,  98  Va.  309,  36  S.  E.  395 216 

Speer  v.  Colbert.  26  Suo.  Ct.  202 308 

Spotswood  V.  Morris  (1906),  12  Idaho  360,  6  L.  R.  A.  (N.  S.)  665, 

85    Pac.    1094 251,  263 

Spradling  v.  Spradling.  101  Ark.  451,  142  S.  W.  848 302 

St.  Catherine's  Cemetery  v.  Fidelity  Trust  Co.,  152  Ky.  797,  154 

S.    W.    29 2.3 

Stapylton  v.  Neeley,  44  Fla.  212,  32  So.  868 306 

Starr  v.  Wiley,  89  N.  J.  E.  79,  103  Atl.  865 225 

State  v.  Ausmus  (Tenn.  Ch.),  35  S.  W.  1021 227 


Tabls  of  Cases.  759 

state  V.  Ackerman,  51  Ohio  St.  163,  37  N.  E.  828,  24  L.  R.  A. 

298    35,   54 

State  V.  Bixman,  162  Mo.  1,  62  S.  W.  828 267 

State  V.  Bockstruck,  136  Mo.  335,  38  S.  W.  317 267 

State  V.  Bruce,  17  Idaho  1,  102  Pac.  831 81 

State  V.  Ellison,  216  S.  W.  967 6,  75 

State  ex  rel.  v.  Blake,  241  Mo.  100,  loc.  cit.  107,  144  S.  W.  1096, 

Ann.  Gas.  1913  C.  1283 267 

State  ex  rel.  v.  McGrath,  92  Mo.  355,  5  S.  W.  29,  5  C.  J.  1343. .   31,  265 
State  ex  rel.  Pearson  v.  Louisiana  &  M.  R.  R.  Co.,  196  Mo.  loc. 

cit.  536 262 

State  ex  rel.  v.  Swanger,  190  Mo.  561,  89  S.  W.  872,  2  L.  R.  A. 

(N.  S.)   121,  4  Ann.  Cas.  563 257 

State  ex  rel.  Goodsill  v.  Woodmansee,  1  N.  D.  246,  11  L.  R.  A. 

420,  46  N.  W.  971 368,  411 

State  V.  Lee,  233  S.  W.  20 53,  251 

State  V.  Mfg.  Mutual  Fire  Assn.,  50  Ohio  St.  145,  33  N.  E.  401, 

24  L.  R.   A.  252 53 

State  V.  Northrop,  93  Conn.  558,  106  Atl.  504 313 

State  V.  Scougal,  3  S.  D.  55,  51  N.  W.  858,  15  L.  R.  A.  477,  44  Am. 

St.  Rep.  756 46,  363,  383,  389 

State  V.  Stebbins,  1  Stew.  (Ala.)  312 396 

State  V.  Stone,  118  Mo.  388,  24  S.  W.  164,  25  L.  R.  A.  243,  40  Am. 

St.  Rep.  388 260 

State  V.  Williams,  8  Tex.  255 412 

Stearns  v.  Fraleigh,  39  Fla.  603,  23  So.  18 180 

Stein  V.  Safe  Deposit  &  Trust  Co.  of  Baltimore,  127  Md.  206,  96 

Atl.  349   : 170,  172,  180 

Steinbeck  v.  Bon  Homme  Mining  Co.,  152  Fed.  333 79 

Stephens  v.  Stephens-Cas.  t.  Talb.,  232   (1736) 27 

Stephenson  v.  Morris,  128  Wis.  242,  107  N.  W.  343 305 

Stewart  v.  Brady,  300  111.  425,  133  N.  E.  310 43 

Stockwell  V.  Stockwell's  Estate,  92  Vt.  489,  105  Atl.  30. .   191,  192,  193 

Stone  V.  Mississippi,  101  U.  S.  814,  25  L.  Ed.  1079 381 

Story  V.  Palmer,  46  N.  J.  Eq.  1,  18  Atl.  363 167,  304 

StuU  V.  Harvey,  112  Va.  816,  72  S.  E.  701 177 

Sullivan  &  Co.  v.  Ramsey  (Tex.  Civ.  App.),  155  S.  W.  580 81 

Sumner  v.  Crawford,  91  Tex.  130,  41  S.  W.  994 162 

Sumner  v.  Williams,  8  Mass.  162,  184 212 

Supervisor  of  Niagara  v.  People,  7  Hill.  512 327 

Supreme  L.  K.  of  P.  v.  Improved  O.  K.  P.,  113  Mich,  133,  71  N. 

W.  470,  38  L.  R.  A.  658 265 

Swift  V.  Craighead,  75  N.  J.  Eq.  102,  75  Atl.  974 77 

Swift  V.  Williams,  68  Md.  236,  11  Atl.  835 208 

Sykes  v.  Beadon,  11  Ch.  D.  170 270,  273,  275,  284,  295 

T, 

Taber  v.  Bailey,  22  Cal.  App.  617,  135  Pac.  975 2,  4,  310 

Taft  V.  Smith,  186  Mass.  31,  70  N.  E.  1031 194,  195 

Taft  V.  Ward,  106  Mass.  518,  111  Mass.  518 107 

Tappan  v.  Bailey,  4  Met.  529,  535   (45  Mass.) 107 


760  Tabi,^  oif  Cases. 

Taylor  v.  Biddall,  2  Mod.  289   (1677) 27 

Taylor  v.  Blatchford,  13  Allen  372,  90  Am.  Dec.  203 385 

Taylor  v.  Davis,  110  U.  S.  330,  4  Sup.  Ct.  147,  28  L.  Ed.  163.  .   203,  214 

Taylor  v.  Denny,  118  Md.  124,  84  Atl.  369 175,  223 

Taylor  v.  Mayo,  110  U.  S.  330,  4  Sup.  Ct.  147,  28  L.  Ed.  163 90 

Teal    V.    Pleasant    Grove    Local    Union,    200    Ala.    23,    75    So. 

335    1,  2,  80,  184 

Temple  State  Bank  v.  Mansfield,  215  S.  W.  154 161 

Templeton  v.  Bockler,  73  Ore.  494,  144  Pac.  405 1 

Thacher  v.  Dinsmore,  5  Mass.  299 213 

Thayer  v.  Daniels,  110  Mass.  345 110 

Thayer  v.  Fairchild,  25  R.  I.  509,  56  Atl.  773 306 

Thellusson  v.  Woodford   (1799),  4  Ves.  Jr.  227,  337 27 

Thomas  v.  Dakin,  22  Wend.  9 326 

Thomas  v.  Lamb,  11  Cal.  App.  717.  106  Pac.  254 35 

Thomas  v.  Thomas,  97  Miss.  697,  53  So.  630 217 

Thomas  v.  United,  192  U.  S.  363,  24  Sup.  Ct.  305,  48  L.  Ed.  481.  . .   342 

Thome  V.  Allen  (Ky.),  70  S.  W.  410 167 

Thorn  v.  DeBreteuil,  179  N.  Y.  64,  71  N.  E.  470 314 

Thorp  V.  Lund,  227  Mass.  474,  116  N.  E.  946 75,  305 

Tibbetts  v.  Tomkinson,  208  N.  Y.  486,  102  N.  E.  562 305 

Trani  v.  Gerard,  181  App.  Div.  387,  168  N.  Y.  S.  808 204 

Traynham  v.  Jackson,  15  Tex.  170,  65  A.  D.  152 202 

Tucker  Mfg.  Co.  v.  Fairbanks,  98  Mass.  101 213,  214 

Turnbull  v.  Pomeroy,  140  Mass.  117,  6  N.  E.  15 217 

Turquend  v.  Kirby,  L.  R.  4  Eq.  123 ; 109 

Turton  v.  Grant,  86  N.  J.  E.  191,  96  Atl.  993 221 

Tyrrell  v.  Washburn,  6  Allen  466-475,  (88  Mass.) 107 

T.  &  P.  Co.  v.  Hood,  59  Tex.  Civ.  App.  363,  125  S.  W.  982 147 

U. 

Ungrich  v.  Ungrich,  131  App.  Div.  24,  115  N.  Y.  S.  413 168 

United  States  Fidelity  &  Guaranty  Co.  v.  Douglas'  Trustee,  134 

Ky.  374,  120  S.  W.  328 215 

United  States  v.  Isham,  17  Wall.  496,  21  L.  Ed.  728 50 

U.   S.  Fidelity  &  Guaranty  Co.  v.  Smith,  103  Ark.  145,  147   S. 

W.    54    3 

United  States  v.  Lacher,   134  U.  S.  628,  10  Sup.  Ct.  625,  33  L. 

Ed.    1080    119 

United  States  v.  Thurston  County,  Neb.  143  Fed.  287 80 

Upham  V.  Plankinton,  152  Wis.  275,  140  N.  W.  5 18,  22,  306 

V. 

Van  Aernan  v.  Bleistein,  102  N.  Y.  470,  4  Cent.  Reo.  635 331 

Vanatta  v.  Carr,  299  111.  47,  82  N.  E.  267 79 

Veazie  Bank  v.  Fenno,  75  U.  S.  8,  Wall.  533,  19  L.  Ed.  482 395 

Venner  v.  Chicago  City  Railway  Company,  258  111.  523,  101  N.  E. 

949    35    5g    74    203 

Vernoy  v.  Robinson,  133  (ila.  653,  66  S.  E.  928 '....'....'  180 

Von  Schmidt  v.  Huntington,  1  Cal.  55 154 

Vosburg  v.  Mallory,  155  Iowa  165,  135  N.  W.  577 12 


Tabl^  of  Cases.  761 


w. 

Wadsworth  v.  Duncan,  164  111.  360,  45  N.  E.  132 129 

Wadsworth,  Rowland  &  Co.  v.  Arnold,  24  R.  I.  32,  51  Atl.  1041. .   347 

Walburn  v.  Ingilby,  1  Myl.  &  K.  61 106 

Waldo  V.  Cummings,  45  111.  421 24 

Ward  V.  Shire  (Ky.),  65  S.  W.  8 220 

Warner  &  Roy  v.  Beers  (N.  Y.),  23  Wend.  103 257 

Warren  v.  Pazolt,  203  Mass.  328.  89  N.  E.  381 179,  195 

Webb  V.  Allen,  15  Tex.  Civ.  App.  605,  40  S.  W.  342 147 

Weber  v.  Delia  M.  Mining  Co.,  14  Idaho  404 66 

Weed  V.  Bergh,  141  Wis.  569,  124  N.  W.  664,  25  L.  R.  A.  (N.  S.) 

1217    362 

Weeks  v.  Frankel,  197  N.  Y.  304,  90  N.  E.  969 171 

Weihteuchter  v.  Miller,  276  Mo.  322,  208  S.  W.  39 3,  262 

Welch  V.  City  of  Boston,  221  Mass.  155,  109  N.  E.  174 171 

Wells  V.  Messenger,  249  111.  72,  94  N.  E.  87 80 

Wells  Stone  Mercantile  Co.  v.  Grover,  7  N.  D.  460,  75  N.  W.  911, 

41  L.   R.  A.  252    (1898) 248 

Wertheimer  v.   Swartz   S.  Co.  v.  McDonald,  138  Mo.  App.   328, 

(loc.  cit.)   122  S.  W.  5 258 

West  Texas  Bank  &  Trust  Co.  v.  Matlock,  212  S.  W.  937   (Tex.)      82 

Wheatcraft  v.  Wheatcraft,  55  Ind.  App.  283,  102  N.  E.  42 224,  225 

Whitaker  v.  McDowell,  82  Conn.  195,  72  Atl.  938 180 

White  V.  Hall,  113  Va.  427,  74  S.  E.  212 181 

White  V.  Sherman,  163  111.  589,  48  N.  E.  128 169,  183,  198 

White  V.  Thomas  Inflatable  Tire  Co.,  52  N.  J.  Eq.  178 67 

Whitman  v.  Porter,  107  Mass.  522 233 

Whitney  v.  Mayo,  15  111.  251 154 

Whittemore  v.  Equitable  Trust  Co.,  162  App.  Div.  607,  147  N.  Y. 

S.   1058    74 

Whittingham  v.  Schoefield's  Trustee  (Ky.)   68  S.  W.  116 217 

Wiegand  v.  Woerner,  155  Mo.  App.  227,  134  S.  W.  596 222,  226 

Wilder  v.  Hart  (Ky.),  96  S.  W.  1106 82,  219 

Williams  v.  Boston,  208  Mass.  496,  94  N.  E.  808 234 

Williams  v.  Inhabitants  of  Milton,  215  Mass.  1,  102  N.  E.  355 

7,  50,   53,  100,  231 

Williams  v.  Johnson,  208  Mass.  544,  94  N.  E.  90 241 

Williams  v.  Nichol.  47  Ark.  254,  1  S.  W.  243 226 

Williams  v.  U.  S.  Express  Co.,  195  Mo.  App.  362,  191  S.  W.  1087  262 

Williamson  v.  Grider,  97  Ark.  588,  135  S.  W.  361 227 

Willis  V.  Clymer,  66  N.  J.  E.  284,  57  Atl.  803 175 

Willis  V.  Murray,  4  Exch.  843 110 

Wilmington  Trust  Co.  v.  Jacobs,  9  Del.  Ch.  77,  77  Atl.  78 178 

Wilson  V.  Carrico,  140  Ind.  533,  40  N.  E.  50,  49  Am.  St.  Rep.  213     12 

Wilson  V.  Kennedy,  63  W.  Va.  1,  59  S.  E.  736 302 

Wilson  V.  Smoot,  186  Ky.  194.  216  S.  W.  129 184,  193,  225 

Winchester  v.  Coleman,  133  N.  Y.  279,  31  N.  E.  96,  16  L.  R.  A.  183     39 

Winder  v.  Nock,  104  Va.  759,  52  S.  E.  561 194 

Winsor  v.  Griggs,  5  Cush.  210 213 

Winsor  v.  Mills,  157  Mass.  362,  32  N.  E.  352 32 

Winters  v.  March,  139  Tenn.  496,  202  S.  W.  73 24 

Wisdom  V.  Wilson  (Tex.  Civ.  App.)   127  S.  W.  1128 183 


762  Tabi^e;  of  Cases. 

Witherhead  v.  Allen,  4  Abb.  App.  Dec.  628 329 

Woddrop  V.  Weed,  154  Pa.  307,  26  Atl.  375 82,  180 

Wood  V.  Griffin,  46  N.  H.   230 28 

Wood  V.  Owen,  133  Ga.  751,  66  S.  E.  951 2 

Woodruff  V.  Woodruff,  44  N.  J.  Eq.  349,  16  Atl.  4,  1  L.  R.  A.  380.  .  228 
Wright  V.  Caney  River  Ry.  Co.,  151  N.  C.  529,  66  S.  E.  588,  19 

Am.  Case  384 82 

Wright  V.  Franklin  Bank,  59  Ohio  80,  51  N  .E.  876 92 

Wright  V.  Clark,  81  Miss.  527,  142  N.  Y.  S.  812 208 

Wylie  V.  Bushnell,  277  111.  484,  115  N.  E.  618 164,  194,  225 

Y. 

Yates  V.  Yates,  255  111.  66,  99  N.  E.  360 170 

Yellowstone  County  v.  First  T.  &  S.  Bank,  46  Mont.   439,  128 

Pac.   596    79 


INDEX. 


ACCEPTANCE   OF  TRUST 

Essential  in  vesting  title,  6. 

ACCOUNT 

Duty  of  trustees  to,  222. 

Equity  may  compel  trustee  to,  302. 

Trustee  must  render,  193. 

ACCOUNTING 

Beneficiaries  entitled  to,  33,  164. 

Bill  for,  164. 

Equity  may  enforce,  302. 

ACCUMULATIONS 
Statute  of,  317. 
Action  to  recover,  318. 

ACTION 

See  "Parties." 

Barred  by  laches,  311,  312. 

Beneficiaries  parties  to,  149. 

Brought  in  time,  311. 

By  beneficiary  against  trustee,  313,  317,  355. 

By  cotrustee  to  remove,  307. 

By  distributee,  312. 

By  or  against  association,  154. 

By  trustees,  151. 

For  accumulations,  318. 

For  removal  of  trustee,  227. 

ACTION 

Insolvency  cause  for,  151. 
On  trustee's  bond,  312. 
To  declare  trust  invalid,  317. 
To  recover  taxes,  331,  335. 
Trustees  sustained  in,  315, 

ADVISORY  BOARD 

Beneficiaries  as,  548. 
Provision  for,  548. 


(763) 


764  Index. 

AGENT 

Compensation  of,  245. 
Employed  by  trustees,  422. 
Partner  is,   246. 

AGREEMENT 

See  "Declaration  of  Tkust." 

Created  a  trust,  46,  49,  99,  354,  420,  426,  437,  4r.4 

Created  a  partnership,  100. 

Elements  of  trust  in,  414. 

Essentials  of  trust  in,  414. 

Failed  to  create  trust,  564,  570,  729. 

Must  be  made  by  parties,  304. 

Of  Chicago  Railway  Trust,  625. 

Of  Davis  Coggins  Oil  Co.,  426. 

Of  Martin-Copeland   Co.,  454. 

Of  Pepperell  Mfg.  Co.,  437. 

Of  Wachusett  Realty  Trust,  420. 

AMENDMETNTS 

By  trustees,  18,  48. 

Provision  for  in  trust,  424,  435,  451,  517. 

To  Banking  Act,  371. 

To  trust,  18,  245. 

APPENDIX,  419. 

APPOINTMENT  OF  TRUSTEES 
See  "Trustees." 

ATTORNEYS 

As  trustee,  175. 

Provision  in  trust  as  to,  422. 

ATTORNEYS'  FEES 

Chargeable  to  trust,  223. 

For  services,  193. 

For  trustee,  222. 

Paid  out  of  complainants'  share,  168. 

Trustees  reimbursed  for,  223. 

ASSOCIATIONS 

Action  by  or  against,  154. 
Certificate  holders  associated,  234. 
Confused  with  trusts,  46. 
English  construction  of,  286. 
May  have  capital  stock,  341. 
May  have  certificates,  341. 
Members,  Partners,  260. 
Not  trusts,  237,  295,  352. 


Index.  765 


ASSOCIATIONS— Con/mwe(Z. 
Organized  under  a  law,  322. 
Partnership  relation,  249. 
Sued  as  entity,  264. 
Taxes  on,  47,  321. 
Taxed  under  corporation  act,  323. 
Unnecessary  for  all  to  join,  354. 

B 

BANKING 

Act  of  South  Dakota,  388. 

A  franchise,  391. 

Bank  of  England,  394. 

British  Parliament  Act,  397. 

By  corporations,  369. 

Common  law  right,  366. 

Foreign  coins,  395. 

Free  to  all  under  common  law,  397. 

Issuing  currency  a  franchise,   394. 

Issuing  currency  a  privilege,  394,  395. 

Issuing  notes  not  a  right,  386. 

Laws  repealed,  412. 

Legislation  on.  362. 

Legislature  control  of,  391. 

Limited  to  corporations,  363. 

May  be  regulated,  410. 

National  banking  laws,  397. 

New  York  Act,  386. 

Not  prohibited,  397. 

Persons  may  be  excluded  from,  391. 

Private  and  corporate,  367. 

Powers  construed,  396. 

Power  of  Congress  over,  395. 

Privileges  of — what  are,  341,  391. 

Privileges  subject  to  police  regulation,  391. 

Regulation  of,  391. 

Regulation  of  currency,   894. 

Requisite  to  engage  in.  369. 

Rights  distinguished,  386. 

State  constitution  reference  to,  396. 

What  constitutes,  365. 

Unlawful  for  individuals,  365. 
BANKRUPTCY 

Act  liberally  construed,  394. 

Act  silent  as  to  trusts,  348. 

In  relation  to  trusts,  348. 

In  relation  to  trustees,  348. 

No  one  to  discharge  in  trust,  348. 

Provision  of.  350. 

Purpose  of,  349. 

Receiver,  353. 

Spirit  of  Act,  348. 


766  Index. 


BENEFICIARIES 

Action  against  trustee  by,  313,  317,  355. 

Advisory  Board  provision  for,  548. 

Application  for  a  trustee,  309. 

Committee  of,  416. 

Control  actions  of  trustees,  97,  100. 

Death  of,  104,  108. 

Entitled  to  accounting,  33,  164,  192. 

Entitled  to  profits,  164. 

Entitled  to  statements,  141,  142. 

Equitable  interest  in,  29. 

Functions  of,  49. 

Income  tax,  345. 

Interest  personalty,  92,  98. 

Interest  real  estate,  96,  98. 

Laches,  311,  312. 

Lapse  of  time,  310. 

Liability,  167. 

Liability  none  as  partners,  168,  200,  248. 

May  ask  for  receiver,  143. 

May  sue,  149. 

Necessary  to  trust,  5. 

Non-liability,   248. 

Not  associated,   50,  238,  294,  352. 

Not  entitled  to  partition,  32. 

Not  in  business,  239,  300. 

Not  in  control.  48,  201. 

Not  partners,  235. 

Not  prejudiced  by  delay,  313. 

Parties,  152. 

Petition,  145. 

Protect  trust  property,  165. 

Provision  as  to,  429. 

Reimbursement,  166. 

Removal  of  trustees,  157. 

Represented  by  trustees,  151. 

Rights  of,  137,  138,  249. 

Right  of  assignment,  166. 

Right  to  petition  court,  139. 

Right  to  pursue  trust  property,  80. 

Right  to  receive  income,  50. 

Right  to  receiver,  353. 

Safeguarded.  257. 

Sale  of  interests,  334. 

Terminate  trust,  245. 

Trustees  as,  167,  352. 

Unnecessary  for  all  to  join,  354. 

Who  may  be,  137. 

Wrongs  of,  139. 


Index.  767 


BENEFICIAL  INTERESTS 

Assignable,  166. 

At  death  of  beneficiary,  108. 

Evidenced  by  certificates,  103,  324. 

Individual's  property,  336. 

Personalty,  92,  98. 

Provision  as  to,  416,  433,  457. 

Purchase  by  trustee,  78. 

Real  estate,  96,  98. 

Represent  trust  in  aggregate,  323. 

Sale  of,  45,  111,  334. 

Transferability,  95. 

BILL 

Asking  instructions  of  court,  307. 

BLUE  SKY  LAW 

Construing,  43,  44. 
Of  Illinois,  41. 
Sales  under,  45,  111. 
Sales  void,  45. 

BOOKS 

Opened  by  trustees,  360. 
Provision  as  to,  465,  507. 
Trustees  must  keep,  193. 

BREACH  OF  TRUST 

Beneficiaries  may  sue  for,  151. 
Trustee's  liability  for,  346. 
Trustees  may  be  removed  for,   225. 
What  constitutes,  227. 

BUBBLE  ACT 

Not  applicable  to  America,  107. 

BUILDING  AND  LOAN 

Conducted  under  a  trust,  268. 

BUSINESS 

By  trustees,  289. 

Definition  of,  271. 

For  gain,  275. 

Incident  to  trust,  298. 

May  be  regulated,  400. 

Must  be  free,  401. 

Prohibition  of  must  be  to  all,  401. 

Pursuit  of  a  right,  405. 


768  Index. 


BUSINESS 

Regulation  of,  380. 
What  is  doing,  273,  362, 

BY-LAWS 

A  contract,  257,  260. 
Construed,  257. 
Organization  may  adopt,  257. 
Provision  for  in  trust,  448. 
Void  as  to  strangers,  260. 

C 

CAPITAL  STOCK 

Associations  may  have,  341. 

Distinguished  from  capital,  340. 

Fixed  in  charter,  340. 

Tax  on,  323. 

Trust  has  beneficial  interests,  323. 

Trusts  may  have,  340,  341. 

CARE 

Trustees  charged  with,  194. 

CERTIFICATES 

American  rule  as  to,  103. 

Assignable,  256,  257. 

Cash  surrender  value,  255. 

Copy  of,  439,  495,  539,  597,  638,  696. 

Definition,  341. 

English  rule,  103. 

Evidencing  interest,  103,  104,  324. 

History  of,  102. 

Issuing  of-a  right,  104. 

Legal,  106. 

Muniment  of  title,  342. 

New — issued,  334. 

Preferred,  638. 

Profits  and  losses  follow,  109. 

Provision  for,  512. 

Rights  of  holders,  253. 

Signed  by  trustee,  333. 

Stamp  tax  on,  344. 

Transferring  is  a  right,  111,  324,  340. 

Transferring  on  books,  95,  111. 

Trust  may  or  may  not  have,  339,  340,  341. 

Unissued — no  stamp  tax,  342. 

CITIZENS 

Discriminated  against,  392. 
Fourteenth  amendment,  373. 
In  reference  to  banking,  391. 


Index.  769 


CITIZENS— Continued. 

In  reference  to  paternalism,  387,  388, 

May  not  exercise  a  franchise,  392. 

Privileges  of,  398. 

Protected  under  police  power,  374. 

Restricted  in  rights,  402. 

Rights  of,  403. 

Rights  distinguished  from  franchise,  392,  394. 

Rights  guaranteed,  402. 

Rights  supreme  to  state,  387,  398,  399. 

Right  to  engage  in  banking,  391. 

Right  to  engage  in  business,  407. 

COMMON  LAW 

Banking  free  to  all  under,  397. 
Banking  a  right  under,  366. 
In  force  in  Illinois,  43. 
Insurance  a  right  under,  384,  385. 
Liability,  328. 

Liability  of  corporations  under,  329. 
Modified  by  statute,  376. 
Trust  a  misnomer,  39. 

COMMON  LAW  RIGHTS 

Cannot  be  legislated  away,  387. 
Distinguished  from  law,  35. 

COMMISSIONS 

Allowed  by  court,  219. 

As  compensation,  96,  220. 

Beneficiary  estopped  in  reference  to,  311. 

Brokers,  197. 

Trustees,  190,  218. 

COMMITTEE 

Trustees  in  relation  to,  31. 
Provision  in  agreement,  416,  463,  548. 

COMPENSATION 

Awarded  by  court,  219. 

Commissions,  96,  220. 

Excessive,  218. 

Fixed  by  instrument,  216. 

Forfeiture  of,  220. 

Of  officers,  244. 

Of  trustees,  48,  189. 

Paid  from  trust  funds,  217. 

Provision  for  in  agreement,  423. 

Reasonable,  217. 


770  Index. 


COMPROMISE 

Equity  no  jurisdiction  in,  305. 

CONSIDERATION 

In  reference  to  executory  agreement,  304. 
Not  necessary  in  completed  transaction,  4. 
Title  passes  without  delivery,  5. 

CONSTRUING 

Agreement,  244. 

Banking,  386. 

Bankruptcy  Act,  349. 

Constitutional  provision,  405. 

Corporate  Tax  Act,  342. 

Corporation  Act,  119. 

English  statute,  286. 

General  rule,  8. 

Income  Tax  Act,  345. 

Insurance  Act,  372,  376. 

Partnership  association,  117. 

Phrase,  life  and  liberty,  405. 

Phrase,  organized  under  law,  323,  327. 

Phrase,  organized  under  law  of  U.  S.,  321,  322. 

Rule  against  perpetuities,  29. 

Stamp  Tax  Act,  341. 

Statutes,  119,  262,  267. 

Tax  Act,  321. 

Trust  in  favor  of  beneficiaries,  7. 

Words,  masculine  and  feminine,  117. 

Words,  singular  and  plural,  117. 

Words  unincorporated,  116,  350. 

CONVERSION 

By  trustee,  198. 

CORPORATION 

Act  not  applicable  to  trusts,  250,  261. 

Artificial  person,  328. 

Banks  in  relation  to,  362. 

Banking  limited  to,  363. 

Capital  stock,  340. 

Capital  stock  tax,  321,  323. 

Cannot  usurp  rights  of  individual,  385. 

Construing-act,  118. 

Creature  of  law,  113. 

Discrimination  against  individual,  392. 

Distinguished  from  partnership,   128. 

Distinguished  from  joint  stock  company,  128,  325. 

Existence  derived  from  state,  378. 

Franchise  distinguished  from  a  right,  392. 

Franchise  tax,  321. 


Index.  'J'J^ 


CORPORATION— Coniintied. 

Foreign  corporation  act,  114,  120,  130. 

Insurance  Act  construed,  372. 

Insurance  limited  to,  362,  371,  380. 

Liability  no  common  law,  329. 

May  create  trusts,  48,  58. 

Organization  tax,  321. 

Organized  under  a  law,  322,  378. 

Perpetual  succession,  323. 

Property  taxed,  321. 

Restricted  by  law,  378. 

Shareholders  may  pool  interests,  63. 

Special  privileges  conferred  on,  401. 

Subject  to  state  control,  378, 

Tax  Act,  323. 

Tax  Act  construed,  342. 

Trustees  may  vote  stock,  59. 

Trust  does  not  imply,  71,  352. 

Trust  is  not,  352. 

Trust  is  not  taxed  as,  321. 

Unincorporated   not   embraced   in  corporated,  116. 

Unlawful  acting  as  such,  56. 

With  exclusive  privileges,  383. 

COTRUSTEE 

Bill  to  remove,  307. 

Default  of,  208. 

Tn    fifPTi PT*fl \     174 

Trustee  liable  for  acts  of,  206,  215. 

COURT  OF  EQUITY 

Action  by  cotrustee  to  remove,  307. 

Acts  in  personam,  303. 

Cannot  create  a  trust,  304. 

Disagreement  of  trustees,  304. 

Discretionary  on  removal  of  trustee,  307. 

Executory  agreement,  304. 

Give  no  instruction  on  past  acts,  306. 

Give  no  instruction  on  contingent  events,  306. 

Instruct  on  present  acts,  306,  314. 

Jurisdiction  over  trusts,  302,  303. 

May  administer  trust,  308. 

May  appoint  a  trust  company,  309. 

May  appoint  receiver,  158,  159. 

May  appoint  trustee,  171,  307,  308. 

May  change  trustee,  307. 

May  extend  trust,  306. 

May  instruct  trustees,  242,  304. 

May  remove  trustee,  307. 

Number  of  trustees  discretionary  with,  309. 

Protects  trust  property,  307. 

Trustees  subject  to,  258,  353. 


'j'jT,  Inde:x. 


CREDITORS 

/See  "Third  Parties." 
Equality  of,  348. 
For  additional  work,  347. 
May  sue  in  equity,  347. 
Of  trust,  347. 
Of  trustee,  347. 
Powers  of,  247. 
Unsecured,  349. 

CURRENCY 

See  "Issuing  Currency." 


D 


DAMAGES 

Trust  liable  for,  82. 


DECLARATION  OF  TRUST 

See  "Agreement." 

Beneficial  interest,  416. 

By-Laws,  provision  for,  448. 

Certicates,  provision  for,  439. 

Committee,  416. 

Created  by  instrument,  46,  49,  99,  354,  420,  426,  437,  454,  553,  559. 

Dividends,  provision  for,  449. 

Duration  of  trust,  415. 

Equity  cannot  alter,  305. 

Form  for,  585. 

Liability  limited  in,  417. 

Liability  of  trustees,  provision  in,  448. 

Meetings,  434. 

Property  set  out  in  schedule,  415. 

Property  properly  discribed  in,  426. 

Provision  as  to  oflQcers,  432. 

Provision  as  to  termination,  434. 

Provision  as  to  trustees,  428. 

Purpose  of  trust  should  be  stated  clearly,  415. 

Seal  provision  for,  415. 

Schedule  provision  for,  604. 

Trust  property  described,  414. 

Vests  title  in  trustees,  358. 

DIRECTORS 

Distinguished  from  trustee,  288. 
Duties  of,  152. 
Elected  by  trustees,  67. 
Shares  to  qualify,  70. 

DISABILITY  OF  TRUSTEE 
Will  not  defeat  trust,  308. 


Index.  773 


DISCRETION 

As  to  number  of  trustees,.  309. 

By  court  in  removal  of  trustee,  307. 

Equity  will  not  interfere  in,  304, 

DISTRIBUTION 

Of  trust  property,  92. 
Time  for,  92. 

DIVIDENDS 

Provision  for  in  agreement,  449,  464. 

DURATION  OF  TRUST 
See  "Peepetuities." 
Provision  for  in  agreement,  424,  433,  440. 

DUTIES  OF  TRUSTEES 

In  doubt  to  consult  court,  305. 

Provision  in  agreement  as  to,  457. 

To  account,  222. 

To  carry  on  business,  188. 

To  carry  out  trust,  185. 

To  employ  counsel,  186. 

To  keep  books,  193. 

To  look  after  trust  property,  204. 

To  manage  property,  184. 

To  use  prudence  and  care,  193. 

E 
EMINENT  DOMAIN 

Carriages  on  public  highway,  386. 

ENTITY 

Association  as,  148. 
English  rule,  270. 
Trust  as,  46,  258,  352. 

EQUITABLE  INTEREST 

Vests  in  shareholders,  30. 

EQUITY 

See  "Court  of  Equity." 

ESSENTIALS 

In  preparing  trust  agreement,  414. 

ESTOPPEL 

By  record,  316. 

Doctrine  of  protects  trustees,  314. 

General  rule,  315. 

Previous  judgment  as,  318,  319. 

Res  adjudicata,  315. 


774  Index. 


ESTOPPEL — Continued. 

Safeguard  of  trustee,  313. 
Shareholders,  169,  311. 

EXECUTOR 

As  trustee,  317. 

Carry  on  business,  318. 

EXHIBITS 

See  "Appendix." 

Davis  Coggins   Oil  Company,   426. 

Wachusett  Realty  Trust,  420. 

EXPENSES 

Attorneys  fees,  222. 
Personal  against  trustee,  222. 
Of  trust,  81. 
Of  trustee,  221. 

EXPRESS  COMPANY 
National,  323. 
Organized  by  contract,  324. 
Taxed,  324. 
Taxed  on  capital  stock,  324. 

F 

FEES 

Attorneys,  82. 

FOREIGN  CORPORATION  ACT 

Trust  not  subject  to,  114,  120,  130. 

FORMS 

See  "Appendix." 

Certificates  copies  of,  439,  495,  539,  597,  638,  696. 

Trust  copies  of,  420,  426,  437.  454,  625. 

FRANCHISE 

Banking  as,  391. 

Corporation  as,  324,  331,  378. 

Defined,  392,  397, 

Derived  from  law  or  state,  393. 

Distinguished  from  a  right,  392,  894. 

Erroneously  conferred  on  corporation,  385. 

In  relation  to  rights,  363. 

Is  a  grant,  392. 

Issuing  currency  is,  394,  395. 

May  not  usurp  rights,  398. 

Tax,  321,  326. 

Trust  is  not,  821. 

Trust  not  subject  to,  331. 

What  is  embraced  in,  393. 


Index.  775 

FRANCHISE  TAX 

See  "Taxes." 

Distinguished  from  stamp  tax,  342. 

G 
GIFT 

Distinguished  from  a  trust,  14. 

GOOD  FAITH 

Of  trustees,  304. 

Trustees  charged  with,  194. 

GRANTOR 

See  "Teustob." 

I 
INCOME  TAX 

Construed,  50. 
Provision  of,  344. 
Trustees  not  subject  to,  47. 

INCOMPETENCY 

Of  trustees  will  not  defeat  trust,  308. 

INDEMNITY 

By  contract,  386. 

Contract  of  common-law  right,  385. 

Of  trustees,  347. 

INDIVIDUAL 

Constitutional  right  of,  384. 

Discriminated  against  in  favor  of  corporation,  392. 

Eminent  Domain  in  reference  to,  386. 

Insurance  a  common  law  right,  384,  385,  386. 

No  right  to  issue  bank  note,  386. 

Not  restricted  in  business,  378. 

Requires  no  franchise,  398,  413. 

Rights  cannot  be  taken  away,  399. 

Rights  cannot  be  legislated  away,  387. 

Rights  cannot  be  conferred  on  corporations,  385. 

Rights  distinguished  from  franchise,  392,  394. 

Rights  of  citizens,  403. 

Rights  guaranteed,  402. 

Rights  in  reference  to  paternalism,  387. 

Rights  supreme  to  state,  398,  413. 

Right  to  acquire  property,  374. 

Right  to  contract,  37,  384. 


yjd  Indsx. 


INDIVIDUAL— Con^inMCd. 

Right  to  create  trusts,  64. 

Right  to  engage  in  banking,  391. 

Right  to  engage  in  business,  405,  407. 

Right  to  life  and  liberty,  36. 

Under  different  rule  than  corporations,  378. 

INJUNCTION 
■     Trust  name  protected  by,  125. 

INSOLVENCY 

Beneficiaries  may  sue,  151. 

INSURANCE 

A  common  law  right,  384,  385,  386. 

Act  is  regulation,  382. 

Benefits  of,  377. 

Corporations  and  individuals  in  reference  to,  380,  385. 

Department  in  state,  379. 

Law  construed,  372,  384. 

Law  in  each  state,  379. 

Law  of  Pennsylvania,  363. 

Laws  regulating,  378. 

Legislation  as  to,  362,  379. 

Limited  to  corporations,  371,  380,  382. 

Magnitude  of  business,  377. 

May  be  prohibited,  385. 

Police  power  in  reference  to,  376,  382. 

Reason  for  control  of,  381, 

Requirements  to  engage  in,  379,  384. 

INSTRUCTIONS 

Asked  by  trustees,  307,  314. 

Confined  to  present  duty,  306. 

None  as  to  contingent  events,  306. 

None  as  to  past  acts,  306. 

Right  of  trustee  to,  305. 

Trustees  receive  from  court,  242,  304,  305. 

INTENTION 

Determined  by  acts,  241. 
Of  Congress,  323,  350. 
Of  legislature,  44. 
Of  parties,  156. 
Of  settlor,  14. 
To  create  trust,  7. 

INTERSTATE  COMMERCE 

Constitution  of  U.  S.  in  reference,  134. 

In  general,  113. 

Right  of  trust  to  engage  in,  133,  134. 


Index.  in 


ISSUING  CURRENCY 
/See  "Banking." 
A  franchise,  394. 
A  privilege,  395. 
Power  construed,  396. 


JOINT  STOCK  ASSOCIATION 
See  "Associations." 
Characteristics  of  corporation,  129. 
Defined,  128. 

Distinguished  from  corporations,  128,  325. 
Entity,  262,  264. 
Not  a  corporation,  263. 
Organized  under  a  law,  322. 
Partnership  in  reference  to,  113. 
Taxes  on,  321,  324. 

JOINT  TENANTS 
Trustees  as,  228. 

JURISDICTION 

Court  over  trust,  306,  308. 
Court  over  trust  funds,  303. 
Equity  none  in  compromise,  305. 
Equity  over  trustees,  303. 
Equity  over  trusts,  302. 
Restricted,  304. 

L 

LACHES 

Action  barred  by,  311,  312. 

A  person  guilty  of,  310. 

Defense  to,  action,  311. 

Does  not  protect  fraudulent,  310. 

In  general,  310. 

Not  an  equitable  bar,  313. 

Not  imputed  to  beneficiary,  312. 

What  constitutes,  310. 

LEASES 

By  trustees,  306. 
Court  may  extend,  306. 

LEGISLATION 

As  to  banks,  362. 

Business  and,  362. 

Cannot  usurp  rights  of  citizens,  364,  399. 

Extent  of,  384. 

In  reference  to  franchise  and  rights,  363. 

In  violation  of  rights,  364,  399. 


778  Index. 


'LEGISL,AT10N— Continued. 

Limited  by  constitution,  384. 
May  regulate  business,  384,  392, 
On  insurance,  379. 
Unconstitutional,  412. 

LIABILITY 

See  "Liability  of  Trustees." 
Corporation,  328. 
Individual,  329. 
Limited,  52,  199,  210,  417. 
Limited  to  trust  fund,  259. 
Non-liability,  214. 
Of  trust,  81,  347. 
Shareholders,  167. 
Third  parties,  346. 

LIABILITY  OF  TRUSTEES 
See  "Liability." 
Agreement  governs  as  to,  244. 
Extent  of,  208. 
For  acts  of  others,  205. 
For  losses,  205. 
For  misappropriation,  207. 
For  mismanagement,  204. 
For  negligence,  206,  311. 
For  trust  debts,  198,  311. 
For  violating  trust,  346. 
Limited,  52,  197,  199,  201,  210,  417 
For  secret  profits,  209. 
Non-liability,   202,  214. 
Personal,  197,  204. 
Provision  for  in  agreement,  448. 

LIMITATION  ON  TRUST 
As  to  taxes,  336. 
By  instrument,  305. 
That  business  shall  not  be  illegal,  35. 

M 

MARTIN-COPELAND  COMPANY 
Trust  agreement  of,  454. 

MEETINGS 

Provision  for  annual  and  special,  510. 
Provision  for  in  general,  434. 
Provision  for  notice  of,  446. 
Provision  for  shareholders,  445,  462. 

MERGER 

Not  contrary  to  law,  71. 


Index.  779 


MISAPPROPRIATION 
Action  for,  312. 
Of  trust  funds,  313. 
Trustee  liable  for,  121 

MONOPOLY  .  .  . 

Corporation  with   exclusive  privileges   is,   38<5. 
On  insurance  business,  386. 
On  particular  business,  386. 
Privileges  to  a  class,  383. 
Should  not  extend  to  few,  388. 

N 

NAME 

See  "Trade  Name." 
Protected  by  injunction,  125, 
Statutory,  131,  133. 
Trust  protected  in,  120,  265. 

NATIONAL  EXPRESS  CO. 
Organized  as  a  right,  325. 
Organized  by  contract,   324. 
Taxes  on,  323. 

NEGLIGENCE 

In  reference  to  laches,  310. 
Trustee  liable  for,  206. 

NEW  YORK  BANKING  ACT 
Construing,  386. 
Issuing  notes  under,  386. 

NON-LIABILITY 

Of  trustees,  202,  214. 

NOTICE 

As  to  third  parties,  346. 

Constructive,  347. 

Facts  sufficient,  346. 

In  appointing  a  receiver,  159. 

Of  meetings,  446. 

Recording,  19. 

When  unnecessary,  160. 


OFFICERS 

Appointed  by  trustees,  244. 
Compensation  of,  244. 
Elected  by  trustees,  148,  358. 
Provision  as  to,  432,  445. 


780  Index. 

OHIO 

Banking  Act,  396. 

P 

PARTIES 

See  "Action." 

All  not  necessary,  155. 

Beneficiaries,  151,  152. 

Doctrine  of  representation,  154,  355. 

Doctrine  of  representation  applies  to  trusts,  356. 

Instrument  should  be  clear  as  to,  3. 

Misjoinder,  150. 

Necessary,  152,  157. 

Represented  must  have  common  interest,  356. 

Some  may  sue  for  all,  154,  355,  356. 

Trustee  as,  314. 

Unnecessary  for  all  beneficiaries  to  join,  354. 

PARTITION 

Beneficiaries  not  entitled  to,  32. 

PARTNERSHIP 

Confused  with  trust,  46. 

Creation  of,  100. 

Created  under  common  law  right,  338. 

Distinguished  from  corporation,  128. 

Liability  not  applicable  to  beneficiaries,  200. 

Liability  provision,  417. 

Not  a  legal  entity,  157. 

Not  a  trust,  230,  235,  352. 

Partner  is  agent,  246. 

Profit  sharing,  245. 

Shareholders,   233,   234. 

Shareholders  not  liable  as  partners,  168. 

Taxation  of,  234. 

Test  of,  230,  232. 

PATERNALISM 

Assumes  citizen  is  a  child,  388. 
Definition,  387, 

PATENTS 

Deeded  in  trust,  332. 
Taxation  of,  334. 

PENNSYLVANIA 

Insurance  law,  363. 

PEPPERELL  MANUFACTURING  CO. 
Agreement  a  trust,  437. 


Indi;x.  781 


PERPETUITY. 

Bee  "Rule  Against  Pebpetuity. 
Duration  of  trust  in  reference  to,  415, 
Provision  as  to  in  agreement,  414. 
Trust  not  violating,  33. 
Voluntary  societies,  32. 

PERPETUAL  SUCCESSION 
Corporations,  323. 
Trusts,  323. 

PERSONAL  PROPERTY 

Beneficial  interest,  92,  95,  98. 
Conveyed  in  trust,  4,  11. 
Provision  in  trust,  93. 

PETITION 

By  beneficiary,  145. 

By  trustee,  305,  306. 

Contents  of,  306. 

Five  years  after  death  of  trustee,  312. 

For  receiver — unsustained,   361. 

POWERS  OF  TRUSTEES 

Derived  from  instrument,  176. 
Discretionary,  178. 
Express,  176. 
Implied,  176. 
Incidental,  181. 
Personal,  180. 
Provision  as  to,  457. 
Restricted,  182. 
To  appoint  officers,  244. 
To  carry  on  business,  318. 
To  declare  dividends,  245. 
To  invest  trust  funds,  358. 
To  make  leases,  306. 

POLICE  POWERS 

Banking  privileges  under,  391. 

Cannot  deprive  individual  of  rights,  387. 

Corresponds  to  self  preservation  of  individual,  375. 

Defined,  399. 

Does  not  extend  to  prohibition,  400. 

Enlarging  its  range,  376. 

In  general,  373. 

Inherent  in  all  governments,  374. 

In  reference  to  insurance,  376. 

Is  one  of  regulation,  374. 

Limitations,  375. 

May  regulate  but  not  prohibit,  392,  400. 

May  restrict  issuing  notes,  387. 


782  Index. 


POLICE  POWERS— Continued. 
No  adequate  definition,  374. 

Over  business;    gambling;    lotteries;    Sunday  laws,   381. 
Over  insurance,  382. 
Paternalism,  388. 
Proper  exercise  of,  373. 
Protect  lives,  374. 
Pi-otect  health,  374. 
Protect  property,  374. 
Provisions  of,  386. 
Regulation  of  business,  380. 
Regulation  of  banking,  368,  391. 
Security  act,  41-45. 
When  violating  fundamental  law,  375. 

PRESUMPTION  OF  SETTLEMENT 
After  twenty  years,  312. 

PRIVATE  INDIVIDUALS 

See  "Individuals." 

PROFITS— SECRET 

Trustee  liable  for,  209. 

PROFIT  SHARING 

Partnership,  245. 

PROFIT  AND  LOSSES 
Follow  certificate,  109, 
From  trust  funds,  192. 
Insurance  companies,  378. 

PROHIBITION 

As  to  banking,  397. 
Defined,  387. 

Distinguished  from  regulation,  380. 
Exclusive  grant  to  a  class,  387. 
Legislature  in  reference  to,  392. 
Masquerading  as  regulation,  367. 
^     Not  regulation,  366. 

Of  business,  must  be  to  all  alike,  401. 
What  is  not,  382. 

PROPERTY 

All  kinds  may  be  transferred  in  trust,  4,  76. 

General  rule,  13. 

In  trust,  4,  76. 

Jurisdiction,  303. 

Necessary  to  create  a  trust,  5. 

Rule  against  perpetuity,  27. 

Taxed,  as  partnership,  234. 

Title  must  pass  to  trustees,  6. 


Indbx.  7^:^ 


PUBLIC  POLICY 

In  reference  to  trust,  53. 
No  rule  of,  64. 

R 

RATIFICATION 

General  rule,  168. 

REAL  ESTATE 

Beneficial  interest,  96,  98. 
May  be  placed  in  trust,  4. 

REASONABLE  TIME 
What  is,  311. 

RECEIVER  i.fi    1R0    orrj 

Appointment  discretionary,  156,  ibcs,  6b  (. 

Appointment  of,  146. 

Appointment  without  notice,  158. 

Beneficiaries  may  ask  for,  143,  353. 

Cause  for  appointment  of,  158. 

Evidence  must  be  positive  for  appointment,  357. 

Evidence  failing  to  sustain  petition,  361. 

Prayer  for,  355. 

Procedure,  353. 

Proper  cases  for,  353. 

Requirements  of  petition,  162. 

Rule  as  to  notice,  160. 

Showing  is  necessary,  161. 

Takes  charge  of  trust,  353. 

Trustee  to  succeed,  163. 

When  may  be  appointed,  147. 

RECORDING 
Notice,  19. 

REGULATION 

By  legislation,  392. 

Distinguished  from  prohibition,  380, 

Drugs,  381. 

Easy  of  enforcement,  380. 

Exclusive  grant  to  a  class,  387. 

Gambling,  381. 

Insurance  act  is,  382. 

Intoxicating  drinks,  381. 

Is  a  power  within  a  state,  383. 

Law  in  reference  to,  376,  380. 

Medicine,  381. 

Must  not  be  prohibition,  366. 

Not  prohibition,  368. 

Of  business,  380, 


784  Index. 


REGULATION— Con/iwtted. 
Sunday  laws,  381. 
"What  is  not,  387, 

REIMBURSEMENT 

Beneficiaries  entitled  to,  166. 
Of  trustees,  221. 

REMOVAL  OF  TRUSTEES 
Action  for,  227. 
Breach  of  trust,  225. 
By  court,  224,  307. 
Cause  for,  227, 
Conflicting  interest,  227. 
Discretionary  with  court,  307. 
Jurisdiction,  224. 
Misuse  of  trust,  226. 
Must  be  cause,  307. 
Necessity  for,  226. 
Neglect,  226. 

REPUDIATION 
Of  trust,  310. 

RES  ADJUDICATA 
Estoppel,  315. 
Previous  judgment,  318. 

RESPONSIBLE 

All  trustees  are,  311. 

REVOCATION 
Of  trust,  75. 

RIGHTS 

And  franchises,  363. 

Banking  free  to  all,  397. 

Bill  of,  374,  375. 

Cannot  be  legislated  away,  399. 

Common  law  as  to  banking,  366. 

Constitutional,   384. 

Constitution  of  South  Dakota,  368. 

Conveyed  in  trust,  35,  42. 

Corporation  usurping,  385. 

Creation  of  partnership  in  reference  to,  338. 

Distinguished  from  franchise,  392,  394. 

Distinguished  from  law,  34. 

Gift  of  creator,  46. 

Guaranteed,  368,  402. 

Inalienable,  37,  38. 

Individual  cannot  be  deprived  of,  363,  385,  387. 

Insurance  a  common  law  right,  384,  385. 


Index.  785 


RIGHTS— Continued. 
Invaded,  374. 

Issuing  bank  notes  is  not  a  right,  386. 
Law  recognizes,  46. 

National  Express  Co.  created  under  a,  325. 
Not  a  commodity,  338. 
Not  taxable,  338. 
Of  beneficiary  to  receiver,  353. 
Of  citizens,  403. 
Of  citizens  to  organize,  325. 
Of  individuals,  35,  36,  45,  384. 
Of  individual  to  contract,  384. 
Of  individual  to  write  insurance,  386. 
Of  individual  to  engage  in  business,  405,  407. 
Of  ownership  in  trustee,  358. 
Of  the  State,  380. 
Protected  by  law,  338. 
Subject  to  regulation,  374. 
Supreme  over  State,  398. 

Trust  created  as  a  right,  250,  251,  322,  331,  339. 
Violated  by  legislature,  364. 
When  denied,  375. 

RULE   AGAINST   PERPETUITIES 
Applies  to  trusts,  28. 
Definition,  24. 
Object  of,  24. 
Purpose  of,  26. 
Violated,  57. 

S 

SCHEDULE 

Copy  of,  500,  604. 

In  trust  agreement,  415. 

Trust  property,  415. 

SEAL 

Definition  and  history,  20. 
Provision  in  trust,  415. 

SECURITY  ACT 

Construing,  43,  44. 
Of  Illinois,  41. 
Sales  under,  45,  111. 
Sales  under  void,  45. 

SETTLEMENT 

Presumed  after  twenty  years,  312. 


786  Index. 

SHARES 

Additional  provision  for,  450. 
American  rule,  103. 
English  rule,  103. 
Individual  property,  336. 
Legal,  106. 

On  death  of  beneficiary,  104. 
Provision  as  to,  433,  457. 
Representing  trust  estate,  104. 
Sale  of,  111. 
Transferable,  102. 
Transferring  of  is  a  right,  111. 
Trust  may  have,  341. 

SHAREHOLDERS 

See  "Beneficiary," 

Associated,  partnership,  249. 

Equitable  interest  in,  29. 

Estoppel,  169. 

Interest — 'personalty,  92. 

Liability  of,  167. 

May  be  trustee,  227. 

May  terminate  trust,  245. 

New  shareholders,  31. 

Not  partners,  235. 

Not  associated,  238,  294,  300. 

Partners,  233,  234,  241. 

Ratification  by,  168. 

Reimbursement  of,  166. 

Rights  of,  249. 

Right  to  assignment,  166.  ■ 

SOUTH  DAKOTA 

Banking  act,  388. 
Constitution  of,  368. 
Declaration  of  rights,  368. 

STAMP  TAX 
See  "Taxes." 
Act  construed,  342. 
Distinguished  from  franchise,  342. 
Federal  act,  339. 

No  difference  between  incorporated   and   unincorporated,  341. 
Only  on  issued  certificates,  342. 

STATUTE 

Against  accumulation,  317. 
Banking,  362. 

Banking  act  of  New  York,  387. 
Banking  act  of  South  Dakota,  389. 
Banking  act  of  Wisconsin,  363. 
Bankruptcy  Act,  349. 


Index.  787 


STATUTE — Continued. 

Construing  income  tax  act,  345. 

Construing  insurance  law,  376. 

Construing,  119,  262,  267,  292,  342. 

Construing  Stamp  Tax  Act,  341. 

Corporation  and  association,  329. 

English,  286. 

Modern  on  insurance,  379. 

Modify  common  law,  376. 

On  Insurance,  362. 

Pennsylvania  Insurance  Act,  363. 

Proper  office  of,  376. 

Tax  act  construed,  322. 

Trust  derives  no  benefit  from,  339. 

Trust  not  organized  under,  339. 

Violates  rights,  364. 

STATUTE  OF  FRAUDS 
Trust  must  be  within,  3. 

STOCK  CERTIFICATES 

See  "Ceetificates." 

Definition,  340. 

Term  not  peculiar  to  corporations,  340. 

SUBSTITUTED  TRUSTEE 

Accounts  for  settlement,  186. 

Commissions  of,  191. 

In  general,  174. 

May  follow  methods  of  predecessor,  188. 

SURVIVORSHIP 

Death  of  trustee,  228. 

T 

TAXES 

Act  construed,  321. 

Act  limited  to  corporations,  323. 

Advantage  with  trust,  321. 

Application  to  correct,  335. 

Assessed  as  partners,  231. 

Associations,  47,  321. 

Capital  stock  tax,  323. 

Commodities  are  taxable,  338. 

Construction  of  Income  Tax  Act,  345. 

Corporations — capital  stock,  321. 

Corporations — organization  tax,  321. 

Firm  property  is  taxable,  338. 

Franchises,  326. 

Franchise  and  stamp  tax  distinguished,  342. 

Franchise  tax  on  corporations,  321. 

Income,  47,  321,  344. 


788  Inde;x. 


TAXES — Continued. 

Income  tax  construed,  50. 

Intention  of  Congress,  323. 

Is  excise  on  franchise  or  privilege,  338. 

Joint  stock  company,  321. 

Must  be  reasonable,  339. 

Not  on  rights,  338. 

Not  a  license  fee,  337. 

On  machinery,  333. 

On  patents,  334. 

On  value  of  shares,  336. 

Partners  jointly  taxed,  232. 

Partnership  property,  234. 

Stamp,  339. 

Stamp  act  construed,  344. 

Subject  to  limitations,  336. 

Trust  not  subject  to  franchise  tax,  331. 

Trust  not  taxed  as  corporation,  321,  324, 

Trust  property,  232. 

Trustees  not  liable  for,  215. 

Trustees  return  on  income  tax,  344, 

TERMINATION  OP  TRUST 
See  "Duration." 
Beneficiaries  not  entitled  to,  33. 
By  beneficiaries,  23,  245. 
By  instrument,  21,  424,  433,  440,  446. 
By  Trustee,  22. 
By  trustor,  22. 
From  other  causes,  23. 

TESTATOR 

Property  to  children,  303. 

TESTAMENTARY 

Disposition  of  property,  10. 
Trustee,  309. 

THIRD  PARTIES 
See  "Creditobs." 
Becoming  trustee,  346. 
Facts  to  put  on  notice,  346. 
Impressed  with  trust  on  notice,  346. 
In  reference  to  trustee's  violation,  346. 
On  notice,  346. 

TIME  LAPSE  OF 

No  bar  between  trustee  and  beneficiary,  310. 

TITLE 

Passes  in  praesenti,  15. 

Provisions — not  in  beneficiaries,  429. 


Index.  7^9 


TITLE — Continued. 

Provision — in  trustee,  429,  443. 

Separation  of  legal  from  beneficial  interest,  14. 

TORTS 

Trust  estate,  83. 

TRADE  NAME 
See  "Name." 

Fraud  in  use  of — statutory,  127. 
Protected  by  injunction,  125. 
Trust  protected  in,  120,  264. 

TRUST 

Acceptance  necessary,  6. 

Action  to  have  declared  invalid,  317. 

Advantage  in  taxes,  321. 

Agreement.     (/See  "Agreement.") 

Agreement  created,  250. 

Amendment,  18. 

As  an  entity,  46,  258,  352. 

Bankruptcy,  348. 

Business  not  requiring  franchise  may  use,  413. 

Capital  of,  340. 

Common  law,  39. 

Consideration,  4. 

Consolidation,  69. 

Construing,  6,  10,  12,  16. 

Created  as  a  right,  250,  339. 

Created  on  invention,  332. 

Created  for  all  purposes,  4. 

Created  by  agreement,  46,  420,  426,  437,  454,  503. 

Creature  of  contract,  413. 

Creditors,  347. 

Damages — liable  for,  82. 

Definition,  1,  12,  137,  177. 

Derives  no  benefit  from  statute,  339. 

Difficult  to  determine  from  partnership,  354. 

Directed  by  equity,  304. 

Disability  of  trustee  vf\\l  not  defeat,  308. 

Distinguished  from  gift,  14. 

Doctrine  of  representation  applies,  356. 

Duration  of,  415,  424,  433,  440. 

Elements  of,  5. 

English  rule,  269. 

Equity  cannot  create,  304. 

Equity  jurisdiction  of,  302. 

Exclusive  management  and  control  in  trustees,  358. 

Exercising  functions  of  corporation,  44. 

Exists  as  a  right,  331. 

Expenses  of,  81,  166. 

Fees,  81. 


790  Index. 


TRUST — Continued. 

Formality  not  necessary  in  creating,  2. 

Foreign  corporation  act,  114. 

Foreign  corporation  act  not  applicable,  120. 

In  business  not  restricted,  378. 

Incompetency  of  trustee  will  not  defeat,  308. 

In  form  of  will,  471,  475. 

In  hands  of  receiver,  353. 

In  reference  to  associations,  46. 

Intention  of,  241. 

Intention  to  create,  7. 

Interstate  commerce,  113,  133. 

Is  a  citizen,  39,  328. 

Laches  run  against,  310. 

Leases  may  extend  beyond  duration  of,  306. 

Legal  title  in  trustee,  171. 

Liability  of,  81,  347. 

Liable  for  expenses,  198. 

Liable  for  secret  profits,  209. 

Limitation,  35. 

Limited  by  instrument,  305. 

May  be  created  by  will,  12. 

May  be  extended,  306. 

May  embrace  rights,  35. 

May  have  capital  stock,  341. 

May  have  certificates,  341. 

Must  be  written,  3. 

Name  protected  by  injunction,  125. 

Natural  person,  39,  328. 

Notice,  19. 

No  capital  stock  tax,  321,  323. 

No  franchise  tax,  321,  331. 

No  perpettual  succession,  323. 

Not  an  association,  237,  287,  295,  352. 

Not  a  corporation,  71,  352. 

Not  a  joint  stock  company,  345. 

Not  a  partnership,  230,  235,  242,  258,  352. 

Not  a  partnership  or  association,  57. 

Not  organized  under  law,  322. 

Not  subject  to  corporation  act,  250,  261. 

Not  subject  to  corporation  tax,  323. 

Not  taxed  as  corporation,  321. 

Organized  as  a  right,  42,  45,  73,  113. 

Private,  32. 

Property,  76. 

Protected  by  court,  307. 

Public  policy,  53. 

Purpose  of,  4. 

Recording,  19. 

Represented  by  beneficial  interests,  323. 

Repudiated  by  trustees,  310. 


Index.  79^ 


TRUST — Continued. 
Revocation,  75. 

Rule  against  perpetuities,  24. 
Safeguards  beneficiary,  257. 

Seal,  20.  .     x,.     . 

Should  be  clear  and  concise  as  to  parties  and  object. 

Special  words  not  necessary  to  create,  2. 

Subject  to  court  of  equity,  353. 

Termination  of,  21,  24. 

Test  of,  230,  235. 

Torts,  83. 

Title  to  property  must  pass  to  trustees,  6. 

Title  in  trustee,  358. 

Trade  name,  120,  264. 

Trustees  act  as  unit,  172. 

Trustees  may  be  removed,  307. 

Under  different  rule  from  corporation,  378. 

Upheld  as  such,  420. 

Validity,  18,  34. 

Well  known  institution  of  law,  352. 

When  testamentary,  10. 

Who  may  create,  11. 

TRUST  ESTATE 
See  "Trust." 

Liable  for  acts  of  agents,  92. 
Liable  for  expenses,  198. 

TRUST  FUND 

Bears  expenses,  221. 

Compensation  paid  from,  217. 

Distribution  of,  92. 

For  exclusive  use  of  beneficiary,  346. 

Invested  by  trustee,  358. 

Invested  as  directed,  185. 

Liable  for  trustees'  acts,  89. 

Liability  limited  to,  259. 

Misapplication  of,  151. 

Misappropriation  of,  313. 

Pay  into  court,  303. 

Profit  from,  192. 

Reached  by  petition,  306. 

TRUST  INSTRUMENT 

See  "Declaration  of  Trust." 

TRUST  PROPERTY 
Bears  expenses,  221. 
Beneficiary's  right  to  protect,  165. 
Beneficiary's  may  follow,  165. 
Change  in  form,  80. 
Conversion  of,  81. 


792  Index. 


TRUST  PROPERTY— Continued. 
Described  in  agreement,  426. 
Disposal  of,  415. 
Distribution  of,  92. 
Following,  47,  81. 
In  agreement,  414. 
In  general,  76. 

Mingling  with  other  property,  79. 
Private  debts  of  trustee,  82. 
Purchasing  by  trustee,  76. 
Represented  by  beneficial  interests,  323. 
Sale  to  trustee,  77. 
Set  out  in  schedule,  415. 
Taxation  of,  232. 

TRUSTEES 

Acceptance  of  trust,  6. 

Acceptance  provision  as  to,  466. 

Act  by  majority,  358,  428. 

Act  as  a  unit,  172,  428. 

Acts  may  be  ratified,  168. 

All  are  responsible,  311. 

Appoint  officers,  244. 

Appointment  of,  170,  224.  307. 

Appointed  by  court,  224,  308. 

As  attorney,  175. 

Associated,  290. 

Attorney's  fees,  222. 

Bankruptcy,  348. 

Beneficiaries  may  be,  167,  227. 

Beneficiaries  and  trustees  not  associated,  352. 

Beneficiaries  may  sue,  313,  317,  355. 

Care  and  caution,  194. 

Certificates  assignable  to,  256. 

Certificates  provision  for,  528. 

Collective  capacity,  172,  358,  428. 

Commissions,  190,  218. 

Compensation,  48,  189,  216,  217,  218. 

Conflicting  interest,  227. 

Conspiracy  by,  166. 

Conversion,  198. 

Cotrustee,  174. 

Creditors,  347. 

Death  of,  172,  228. 

Disability  of,  308. 

Disagreement  of,  304. 

Distinguished  from  directors,  288. 

Duties,  85,  184. 

Duty  to  beneficiaries,  142. 

Duty  to  ask  advice  of  court,  305. 

Elect  directors,  67. 

Exclusive  management  and  control,  358. 


Index.  793 


TRUSTEES— Continued. 
Executor,  317. 
Exemption,  201. 
Expense,  221,  222. 
Fiduciaries,  50. 
Filling  vacancy  among,  48. 
Functions  of,  49. 
Good  faith,  194,  304. 
Hold  legal  title,  171. 
Hold  title  to  trust  property,  358. 
Holders  of  corporate  property,  48. 
Income  tax,  47. 
Incompetency,  308. 
In  control,  46,  97. 
Indemnity,  347. 
Instructed  by  court,  242,  305. 
Instructions,  314. 
Interfered  with,  307. 
Joint  tenants,  228. 
Lapse  of  time,  310. 
Liable  for  losses,  205. 
Liable  for  acts  of  others,  205. 
Liable  for  negligence,  206. 
Liable  for  misappropriation,  207. 
Liable  for  trust's  debts,  198. 
Liability,  88,  89,  91,  197. 
Liability  limited,  90,  198,  209. 
Majority  of,  173. 
Masters,  248,  250. 
May  elect  oflBcers,  148. 
May  invest  trust  funds,  358. 
May  make  leases,  306. 
May  petition  court,  305. 
Mismanagement,  204. 
Must  render  account,  164,  191,  193. 
Necessary  to  creation  of  trust,  5. 
Non-liability,  202,  214,  215. 
Not  bound  by  acts  of  others,  226. 
Not  joint  stock  company,  345. 
Not  partners,  235. 
Number  of,  309. 
Number  of  in  agreement,  428. 
Owners  of  trust  property,  137,  171. 
Powers  conferred  on,  73. 
Powers  of,  176. 
Private  debts,  92. 
Profit  by,  164,  192. 
Protected  by  estoppel,  314. 
Prudence  and  care,  193. 
Purchasing  beneficial  interests,  78. 
Purchasing  trust  property,  76. 
Refusal  to  act,  246. 


794  Index. 

TRUSTEES— Continued. 
Reimbursement  of,  221. 
Removal  of,  224,  226,  307. 
Removal  discretionary,  307. 
Removable  for  cause,  225. 
Represent  beneficiaries,  150. 
Repudiation  of  trust,  310. 
Resident  trustee,  308. 
Resignation  of,  180. 
Return  on  income  tax,  344. 
Safeguarded  by  estoppel,  313. 
Salary,  190. 
Sale  to  themselves,  77. 
Settlement  presumed,  312. 
Subject  to  committee,  62. 
Subject  to  court,  257. 
Substituted,  174. 
Sustained,  315. 
Testamentary,  309. 
Title  passes  to,  17,  137. 
To  carry  on  business,  318. 
To  use  best  judgment,  303. 
Trustor  may  act  as,  75. 
Trust,  amendment  by,  18. 
Trust  company,  309. 
Vacancy,  309. 

Vacancy — provision  for,  528. 
Violating  trust,  346. 
Voting  stock  in  corporations,  59. 
Who  may  be,  175. 

TRUSTEES'  DUTIES 

See  "Duties  of  Trustees." 

TRUSTEES'  LIABILITY 

See  "Liability  of  Trustees." 

TRUSTOR 

As  trustee,  75. 

Creates  for  own  benefit,  74. 

Hostility  of,  307. 

Intention  of,  14,  74,  241. 

Limitation  on,  75. 

May  declare  a  trust,  73,  74. 

Must  transfer  property,  6,  11,  12. 

Necessary  in  creation  of  trust,  5. 

Reserve  powers,  13. 

Who  may  be,  74. 


Inde;x.  795 


UNINCORPORATED  COMPANY 
Confused  with  trust,  46. 
Construing,  350. 

Does  not  include  corporations,  116. 
Rights  of,  118. 


VACANCIES  OF  TRUSTEES 
Provision  for,  528. 


VALIDITY 

Of  Trust,  34. 


W 


WILL 

Against  statute  of  accumulations,  317. 
Creating  trust,  471,  475. 
Executor  of,  317. 
Judicial  construction,  318. 
Trust  may  be  created  by,  12. 
Validity,  test  of,  318. 

WISCONSIN 

Banking  Act,  363,  369. 

Banking  Act  violates  rights,  364. 

WACHUSETT  REALTY  TRUST 
Agreement,  420. 

WORDS 

See  "Construing." 
Construing,  117. 
Given  normal  meaning,  350. 
Life,  liberty,  construed,  406. 


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